The Arkansas Realtors® Association (ARA) released their report on September home sales this morning. The report notes that “home sales in September 2010 remained 21 percent below the state’s September 2009 pace when home-buyers were ramping up in advance of the initial deadline for the tax credit last November.”
Earlier in the week, the National Association of Realtors® (NAR) released data on existing home sales nationwide. The NAR report noted that sales “remain 19.1 percent below the 5.60 million-unit pace in September 2009 when first-time buyers were ramping up in advance of the initial deadline for the tax credit last November.” However, the headline on the NAR report, “September Existing-Home Sales Show Another Strong Gain,” emphasized the change from the previous month. The report highlighted the fact that sales were up 10.0 percent (seasonally adjusted) compared to August.
In comparison to September 2009, the national report and the Arkansas report tell the same story. Sales in 2010 are much lower than they were when a first-time home-buyer’s tax credit was in place. However, when assessing the current state of the market and the near-term outlook, the NAR’s month-to-month comparison provides more timely information.
In order to compare the more recent pattern of Arkansas home sales with the recent national statistics, it is necessary to explicitly take account of seasonal factors. As noted in last month’s post on this topic, home sales follow a highly seasonal pattern. This year, the typical pattern has been distorted by the expiration of the second round of home-buyer tax credits at the end of April. Sales remained relatively strong in May and June as qualifying contracts continue to close, but dropped sharply in July. The report from the NAR highlights recovery from that low point.
The chart below shows seasonally-adjusted home sales for Arkansas. Two methods of seasonal adjustment are illustrated. First, the “Direct” method applies the standard Census X-12 ARIMA procedure to the ARA data for the period January 2007 through December 2009, extrapolating the 2009 seasonal factors forward into 2010. The second method applies the implicit seasonal factors from the NAR data: Specifically, we use the most recent seasonal factors for the NAR’s “South” region, applying them to previous years’ data for Arkansas.
The two methods of seasonal adjustment yeild similar results. Seasonally adjusted sales were declining steadily during 2007 and 2008. They recovered during 2009, but then dropped off after the expiration of the first round of tax credits near the end of the year. Sales surged in March and April, as home-buyers rushed to take advantage of the second round of tax credits, then dropped off sharply to reach a low point in July. This is the same pattern that is evident in the national sales statistics as well.
After hitting a low-point in July of this year, home sales in Arkansas have shown two months of increase. The NAR report touted a 10% increase in September. The corresponding figure for Arkansas is in the range of 15 to 18 percent (depending on the method of seasonal adjustment). Compared to the low point in July, Arkansas home sales were up about 22 percent (using either method of seasonal adjustment). The corresponding figure for nationwide home sales is 17.8 percent.
After making the adjustments necessary to legitimately compare month-to-month sales, the report on Arkansas home sales in September could carry the same headline as the NAR’s national report: September Home Sales Show Another Strong Gain.