Existing home sales rise in December: have we bottomed out?

The National Association of Realtors announced Tuesday announced that its seasonally adjusted index of pending sales for previously owned homes increased 6.3 percent in December. That's compared to the previous month, which was the lowest rated on record. The December 2008 index was also up 2.1 percent versus December 2007.

However, the report cited home sales increasing 13 percent in the South and Midwest but still fell 4 percent in the West.

It's way too early to say the recovery is here, especially as it relates to single-family homes or multifamily housing. Even so, might figures like this represent for the economy the first buds on a bare tree branch, or the first migratory birds passing through on their way back north?

Unless you're one of the unfortunate unemployed or a business owner looking down closure, much of economic ebbs and flows are psychological. As inventories pile up during this recession, prices are falling, whether it's for homes or stocks or even groceries. The Dow Jones and other stock market indicators seem to show the economy has bottomed out, but it's no done deal either.

What do the rest of you think - is the economy showing its first signs of life again, or is it just wishful thinking to cite a couple of wishful-thinking, out-of-context statistics as the tea leaves of recovery?

Comments

[ellen]

I think it is too soon for a recovery. My guess is that the increase in sales of existing homes in the MidWest and South is related to re-sale of foreclosed homes. You are right about the psychology of the market, but I think there needs to be -- and hope and want to see -- a major readjustment of prices that had risen unreasonably beyond income due to speculation (inflated demand).

[sut]

"Unless you're one of the unfortunate unemployed or a business owner looking down closure, much of economic ebbs and flows are psychological."
Not for anyone with a 401K - those losses are real, and the desire to increase savings will be around for a while - that's why cutting taxes is probably a bad idea to stimulate the economy, and the threat of deflation is real.
"The Dow Jones and other stock market indicators seem to show the economy has bottomed out, but it's no done deal either."
There's a big difference between the stock market bottoming out and the economy bottoming out. I believe that during the Depression, the stock market bottomed out in 1930 or '31, but the Depression did not really end until years later. Hopefully the housing sales figures do indicate a bottoming out of that market - which theoretically should eventually help shore up the broader economy, but that could take a while given the amount of job losses that have already occurred, and those to come.

[Mike M]

I think that the key here is the term "Seasonally Adjusted". December is typically the month with the least home sales of the year. It is quite possible that less homes were sold in December than November, but that they have been seasonally adjusted to be shown as more.

This kind of mumbo jumbo is very misleading, and should be evaluated with the source in mind. Of course realtors are ready to tell us we are rebounding. Their incomes are at stake!

[amy]

Interesting article. I just came across another helpful website on the current economic downturn and housing: http://www.recessioninfocenter.com

[robert]

thanks for the link, but I got to the first graphic where they spell Oregon with an 'a' and couldn't go much further.

While we are discussing housing prices and economic recovery with external links, here's ne I check weekly. Good stats and analysis:
http://www.portlandhousing.blogspot.com/

[Paul]

House prices in Portland had a very late uprise compared to many other cities. I think the values will be dropping significantly this year and into 2010.

[Jeff]

I think there are valid arguments on both side about this government plan. Will it raise the budget deficit? Probably. Will it help? That’s a good question. I think economies go through cycles and this might be one of them. I read a good article on recessions and their history on

http://www.recessioninfocenter.com

[Michael Napolitano]

It's obvious that we are in a down economy, but I actually think that one of things making it worse is talking about it.

Talking about the recession makes everyone thinks it's worse. The more we talk about it, the more people are afraid to spend money. I know not everyone will agree with this, but I do think it's a small factor.