I understand but I also watch local markets particularly ones in CA, along the West Coast and some east coast markets like DC, NYC and Boston. These markets tend to have savvier buyers and tend to lead the national market. Plus, they make up a big percentage of housing sales in the US. Everyone of those markets has seen their more expensive properties start to move in the past three months....particularly CA and NYC. Remember, 90% of the population is still employed, many of whom are not worried about losing their jobs.
But please don't get me wrong........things are not great. Rather, the recovery is moving along at a slow pace. The US economy took a big hit......it is convalescing now. It will be a while before things are good.
Last month, when new home sales fell 33%, I warned investors that “This data series is notoriously noisy, and you are must better off using a 3 month moving average than reading too much into any single month.”
This month, we see that New Home sales jumped 24%. The same caveat applies: Ignore the swings, look at the moving average to smooth out the volatility.
In fact, the series is so noisy that way back in 2005, we had to do a study to figure out what to make of it. Our conclusion?
“Looking back over the past 15 years of data, we see that a mean regression has followed nearly all double digit monthly gains. The subsequent month’s data was significantly lowered — flat to negative in nearly every case.”
I have yet to do study on the negative double digit months, but I have a suspicion it would be the same. Bottom line: Anytime you see a big gain or drop in this data series, you should expect a reversal the following month. |
