Here’s an interesting piece by economist Barry Ritholtz on how not understanding things like annual home-sales cycles keeps the media confused about the housing market.

January is the worst month of the year for sales. From that low point, sales improve gradually for each of the next 6 months. They plateau over July and August, and then began heading down until December. This occurs year after year.

For those people who actually want to understand the state of the Housing market, you have two options that avoid the cyclical seasonality: 1) You use year over year data. This removes the seasonal patterns by  comparing January to January, June to June, etc. And 2) Compare non seasonably adjusted monthly data over the course of multiple years.

[snip]

The people who follow housing closely expected an increase in February. It happens every year, as the chart I showed yesterday revealed. (Chart below –ed) And the March data will improve over February data, and April over March, and May over April and June over May. That is the seasonal pattern, and it is only unexpected by those people who are unfamiliar with the data, and simply do not know better.

 

ehs-nsa-feb2009