House Confusion at The New York Times

The piece is entitled Believe It or Not, Existing-Home Sales Were Up in ’09. Why wouldn’t I believe it? Why wouldn’t anybody? We were supposed to have an opinion on this topic? And a wrong one?

I suppose that if you misunderstood what was meant by the term "existing-home sales," confusing it with the prices for houses, rather than simply the number of non-new houses that changed hands in 2009, you might be surprised. Through November ’09 the Case-Shiller 20 City was down a little less than 3% for the year. (December hasn’t been reported yet.) That’s a great improvement on the year before, ’08 was down more than 18%, but it’s still down. So, yes, if you thought "existing-home sales were up" meant that prices were up, your befuddlement might have caused a brief bit of erroneous optimism.

Alas, that’s not what it means. The count of houses sold is of great interest to real estate brokers, who make money on each transaction, and of almost no use to anybody else. True, there is a rough and unreliable relationship between sales volume and prices. (See chart here.) It is enough that if we had no price indexes we might use sales volume as one of our tea leaves to help us guess what was going on.

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