Monday, February 2, 2009

Home Sales Are Normal

Insightful article in the January 2009 issue of Financial Focus. The piece, written by Greg Sweeney, CFA , delves into historical home sales data in the last 20-year and 40-year periods and how they compare to the most recent annual home sales report. Read it here.

Put into historical perspective home sales in the most recent period are normal. He writes:
"Going back to data for home sales from 1969 through today, readers may find it interesting that annual existing home sales averaged 3.54 million units per year. Bringing the data more current, from 1989 through today, average existing home sales were 4.28 million units a year. Strip out the time period from 2003 to 2007, which featured excessive sales, and the previous 20 years’ home sales averaged 3.86 million units. The latest annual home sales report shows 4.02 million home sales, consistent with both 40-year and 20-year averages."
What he doesn't mention in the article is the period for which the latest annual figures are reported. I'm assuming it's 2008.

Keep in mind, these stats cover existing home sales, excluding new construction. As any home builder is painfully aware, we have a glut of new home inventory in America today. Still, SOMEONE is buying existing homes.....a lot of them.

To my way of thinking, the long view provides us with some much needed perspective. Those of us with perspective find some sense of peace in the cyclical nature of the world around us.

"Every generalization is dangerous, especially this one. "
-Mark Twain

-Photo by lazlo-photo


Steve said...

My gut feeling is that the culmination of "steady" home sales is a marriage between plummeting values and investors with deep pockets. Mind you, the latter is a no doubt a small percentage of the overall demography of home buyers, but I know many investors in my area who are scooping up homes like there is no tomorrow.

Boomer said...

Steve, you might be right about the deep pockets investors. All the more reason to have our financial houses in order and a load of cash on hand, no?

Terry Sprouse said...

I like the longer range perspective that you take. Regardless of what the economy is like, people will still have to buy houses, just like they will continue to buy groceries and other necessities of life. That makes me think that the recession will not last too long.

And, of course its in the interest of the news media to present any bad news in its most dire perspective, to sell more newspapers & get more viewers. I take it with a grain of salt.

Boomer said...

@Terry Sprouse: Right on, Terry. A fairly large percentage of consumers (35 & under) have never experienced an economic cycle. We old(er) dogs get it. :)

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