Home Sales and Home Prices: Know the Difference

posted on June 9th, 2008 filed under: Real Estate News

When you see news reports about the condition of the real estate market, be careful about whether the report is about the number of homes sold, or the price of homes sold.  The two measures usually move together, but sales figures can be expected to lead price figures at turning points.

For example, home sales peaked nationwide in 2005, but the median price nationwide peaked in 2006.  Similarly, in bubble-state Florida, sales peaked in 2005 and median prices peaked in 2006.  The difference there was dramatic: Sales fell almost 25% from 2005 to 2006, while prices actually rose about 5%.

When the market turns around, sales probably will begin to rise before prices.  In the early 1990s, the Northeast was the weakest region.  Data from the National Association of Realtors shows that sales in the Northeast bottomed in 1990.  Prices bottomed in 1995, five years later.

Lesson: Sales activity may rebound even as prices continue falling.  So when you see reports that the housing market is bouncing back, check to see whether the bounce is in sales or prices.  They’re not the same.

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posted by // This entry was posted on Monday, June 9th, 2008 at 6:39 pm and is filed under Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed.

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