Even the darkest cloud may conceal a silver lining. Or so the optimists say.
The example du jour comes by way of yesterday’s report on existing home sales for August. On the surface, there’s precious little to celebrate. If you were already bearish on the economy, the news that sales dropped 0.5% last month from July, and are down 12.6% from a year ago, according to National Association of Realtors (NAR), won’t do much to change your vision.
Nor will the year-over-year comparisons: the median sales price dropped last month from a year ago–the first annual drop in 11 years. Another troubling trend: the rapid rise in inventory: the supply of homes for sale in August was up nearly 38% from 12 months previous.
But context is everything if you’re searching for the sunny side of the street. Are you inclined to see the glass half full or half empty? Depending on your answer, you can see what you want to see by tweaking the perspective and emphasizing this and de-emphasizing that. The art of statistics offers a world of opportunity for the ambitious analyst.
Consider, for instance, that while existing home sales were down last month, placed in the context of the trend in recent years the latest numbers don’t look all that bad. David Lereah, NAR’s chief economist, has an eye for seeing the positive, and said so in the press release accompanying yesterday’s update. “After a stronger-than-expected drop in July, the fairly even sales numbers in August tell us the market is at a more sustainable pace,” he said. “It keeps us on track to see the third highest sales year on record, but we do expect an adjustment in home prices to last several months as we work through a build up in the inventory of homes on the market.”
There’s also reason to think that the future could deliver some positive surprises born of mortgage rates that are again falling. The national average rate for a 30-year, conventional, fixed-rate mortgage was 6.52 percent in August, down from 6.76 percent in July, according to NAR’s press release. And last week, the 30-year fixed dropped to 6.40 percent.
“I think the worst of the drops [in existing home sales] are probably behind us, but it is way too early to say that we are at the bottom,” Mark Vitner, senior economist with Wachovia bank, told Reuters via ABC News.
Some optimists also note that while the median sales price of existing homes slipped over a 12-month period for the first time in more than a decade last month, prices in the West actually rose slightly vs. August 2005. But there are limits to walking in the sun and feeling warm and fuzzy about the future. NAR’s Lereah said the Western shoe could soon drop. “In California I think prices are going to have to come down harder,” he advised Reuters via the L.A. Times.
You can be anything you want to be in the 21st century–bull, bear, or something in between. Being right, alas, isn’t getting any easier.