I should have known to bite my tongue when I posted the July existing home sales update.

The highlight of the article was:

As of July, the raw volume of sales has now increased for four consecutive months.  The last time sales rose for four consecutive months was in June 2004. July sales were up 7.2% compared with June, and 5% from July 2008. The monthly gain of 7.2% was actually the largest on record for existing-home sales.

And already I can say “I miss those days!” Don’t get me wrong, I don’t get upset or excited over these economic indicators. I realize they are but small redundant cogs in a much larger machine. Or power lines in a redundant power grid, if you will. If a line goes down, you probably will still have power.

August Results

If you want to understand what the data means, read the July article as I go over the factors a little bit more.

As far as the August data is concerned, sales were down 2.7% to an annualized rate of 5.1 million. Economists had predicted a 2.1% gain over July for an annualized rate of 5.35 million. If you look at the sales versus last year, sales are still up 3.4%. That puts things into perspective a little bit.

Average sales prices dropped another $900 to $177,500 since last month.

This raises the obvious question: Did the $8,000 tax credit drive the 15.2% increase in sales? The tax credit could have simply shifted demand forward, or it could have brought new entrants into the market. Most likely it did both. I’ll leave those arguments for another time, however.

Another EHS Metric

There is still a sign of hope in the NAR date. Paul Dales, senior U.S. economist for Capital Economics, says:

"Despite the dip in sales, the months’ supply of homes for sale fell from 9.3 in July to 8.5 in August, leaving it even further below November’s peak of 11.0. Supply is therefore getting close to the level of 7.5 months that has historically been consistent with stable house prices.”

Often times people look at just the supply of houses, or just the sales data, or just the prices. However, we need to look at a combination of the factors. The sales may have slowed down, but they are still higher than last year, and the monthly supply is coming down.

Only time will tell.

Any Other Signs?

Anyone else have some metrics that they like to follow? I’ve been a fan of Alan Greenspan’s men underpants sales and the state of the dry cleaning industry. It makes me laugh, but it makes perfect sense!