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Economy in Brief

U.S. Housing Drops Sharply, But it’s a Distortion - Look to the Moving Average
by Robert Brusca April 24, 2007

Existing home sales fell sharply in March but only after a similar sharp ramping up over the previous two months. The moving average of sales tells a better story falling by only a modest amount in the month. Meanwhile, home prices came back in the month (NSA) and are still lower year-over-year, but by a fractional 0.3%. Compared to its peak NSA price in July of 2006, median home prices are off by 5.7% and since housing prices make their peak in the summer, that is an exaggeration. Housing remains weak but is hardly falling apart despite his month’s number. Nationwide and in general the decline in home prices has not been large.

The table below shows sequential growth rates for sales by region. There is no clear pattern – but that is actually good news since this month’s drop was so severe and so distorting. Overall, the 3-month pace of sales decline is slightly lower than the year/year pace. But regions show all different results/patterns. House prices are weaker year/year for all regions except the South where a slight gain was posted in March.

By and large while housing has its pessimistic voices and optimistic voices, we are more inclined to see some silver lining in this month’s cloudy (rainy) report. The severity of the headline’s decline in sales is an exaggeration that blunts earlier good news. Price declines are NOT gathering pace. For the most part if the economy does stabilize, housing looks like it will be ok. And there is no trend in housing that makes it look as though it is going to drag economic growth lower. I think the days of those fears are gone. The stock of homes for sale is diminishing and that should reduce pressures too. While some say housing still has not shown the worst of it, we respectfully disagree.

Percent Changes: Existing Home Sales
Mo/Mo% Total North-East Mid-West South West
Mar.07 -8.4% -8.2% -10.9% -6.2% -9.1%
Feb.07 3.7% 15.1% 2.6% 1.2% 0.0%
Jan.07 2.7% -0.9% 4.1% 2.0% 5.6%
Dec.06 0.3% -0.9% 2.8% 0.8% -2.3%
3-Mo:ar -9.6% 18.7% -19.2% -12.9% -16.0%
6-mo:ar -3.5% 15.4% -4.2% -8.7% -9.5%
1-Year -11.3% -5.1% -13.7% -9.7% -16.7%
Prices: Median Prices
One Mo: 1.6% 2.1% 3.3% 1.2% -1.8%
One Year: -0.3% -0.7% -0.2% 0.4% -2.9%
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