Home Sales Skepticism

CoolDMZ is many things. I was told recently by my 2-year-old that I’m “just a man who loves stickers,” for example. But one of the things I am not is a real estate or economics expert. So take the following with a few dashes of salt (to taste).

When I read that there are indicators of slowing home sales, I expect to be told of the number of actual home sales, since a sale indicates an actual transaction–demand being met by supply, capital being exchanged for capital. So in the above article, as in so many others, I only get the number of houses being supplied by the market, my skepticism alarm goes off. If three times as many homes are for sale this month as there were last year, that means crap to me about home sales unless I know how many of those homes were bought. Maybe there is a terminology problem here–maybe “home sales” really does mean “for sale signs posted.”

Because if you’re applying market logic to the situation, as you appear to be when you use words like “indicate” and “market,” then your predictions are based on the supply and demand scenario, I assume. Supply increasing in relation to demand, that’s one thing. That would be indicated, or at least would be additionally supported, by a slowdown in the number of houses being bought, not by the number of houses being put on the market, at least as far as I understand things. It seems like supply could also go up in relation to other factors… like, I don’t know, dozens of news reports about home prices going down?

Okay nerds, have at it. Tell me why I’m wrong.

UPDATE: To head off claims that I am an idiot (even justified ones), I thought I should provide an example of my economic thinking.

Imagine what the supply of HDTVs is this Christmas. Now imagine what the supply was 2 years ago. Do you suppose that is because there is a “slowing of HDTV sales?”

Author: CoolDMZ

"X-ray vision to see in between / Where's my kimono and my time machine?"

6 thoughts on “Home Sales Skepticism”

  1. What you’re missing CoolDMZ is the whole equilibrium concept…

    Market equilibrium exists if the quantity demanded at a given price equals the quantity supplied.

    If the housing market were at equilibrium, the supply of houses for sale (inventory of resale homes) would remain constant. If the supply is increasing, it means that supply is increasing, demand is decreasing, or a little of both.

    Did you know that John Maynard Keynes had a hand fetish?

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  2. i only sort of get that but i’m going to go ahead and say that it supports my contention. increased supply alone does not indicate decreased demand.

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  3. i still think that prices decrease could be a result of increased supply, which we’ve established (i think) might be the result of increased supply only and have nothing to do with a change in demand.

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  4. I think you’re right, it is a terminology problem.They do actually mean “For Sale” signs, and additionally, they mean “time on the market.” What they mean to say is that one can infer from the fact that there are more homes on the market (housing supply) this year as compared with last, is that demand for housing at the current price supplied is falling. At the moment, supply outpaces demand, at the current price. It is cyclical and a self-fulfilling prophecy too, as you suggest. The reports about falling demand may be influencing buyers to wait for the buyers market to return, and prompting current owners to try to capture the tail end of the sellers’ market. To piggyback on Adamant’s comment, we’re reaching a new equilibrium.

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  5. if by “sales” they do mean “for sale” signs, then there is a huge “sales increase.” i still confused.

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