Connections for Success

 

05.04.11

Listen to (MOM) Month-Over-Month Sales!
Jim Gramata

March 21, 2011 – “Home sales FELL in February following three straight monthly increases, according to the National Association of REALTORS®.”

March 28, 2011 – “Home sales INCREASED in February but with notable regional variations, according to the National Association of Realtors®.”

Source: National Association of Realtors (NAR)

It is on everyone’s mind. What is the current state of today’s residential real estate market?  Where is the residential real estate market going?  Where can I find a reliable information source for the real story on where the market trends are heading?

Herein lies the problem!

The information is at best confusing and at times contradictory, even from what most would consider highly reliable sources. Like so many things, while the source of information is of course a major factor, in this example,  even the same source is printing contradictory information.

In addition to who the source is we have to focus on what data is being analyzed and reported on. Most reports offer slivers of relative information and if taken alone can be interpreted as doom.  In the above scenario the two reports are accurate and from the same source, however, when you dig deeper into the reports you would realize that one is based on a year-over-year comparison (YOY) while the other is a month-over-month (MOM) report.  I think MOM is a more relevant source for interpreting where our current residential real estate market has been and where it is heading.  After all, mom knows best.  But seriously, looking at a month-to-month change does provide us with more relevant analysis of what is actually going on.

Most of the recent negative doomsday headlines have been based on the YOY real estate statistics. These numbers are brutal but remember last April was the most active month in recent years because of the Federal Homebuyer Tax Credit incentives. It was the best two-quarters of sales volume ever in my office’s history. Ever! And that includes the 2006 peak sales period!

Many buyers moved their summer or fall buying plans up to take advantage of the incentive. Who wouldn’t? (Well, those buying now I guess). Time and time again we see the number of units sold during the first and second quarter of 2010 spike up above the bracketed quarters. Ergo, comparing this year to last year (YOY) will create the doom and despair articles we are seeing across the country and in the Chicago area.

So when looking to analyze the real estate market, comparing month-over-month sales (MOM!) will give you a clearer picture of market conditions.

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