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‘Seasonally Adjusted’: Is Housing Market Improving, or Not?

Five years of the Obama economy render the government's seasonally adjusted numbers virtually worthless.

by
Tom Blumer

Bio

March 25, 2013 - 9:38 am
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The February 2009 percentage reflected the steep decline in the homebuilding industry once the recession (as normal people define it) began in July 2008. February 2010 is high because of a mini-rebound tied to first-time homebuyers’ desires to take a tax credit which expired two months later. February 2011′s low percentage is tied to the industry’s bottom, which occurred at about that time. The high 2012 and 2013 figures are the result of respective slumps which occurred during the previous summer and fall.

In broad historical context, more thanks to luck than anything else, the bureau’s seasonally adjusted annual rate of 917,000 looks reasonable. But does it accurately reflect the economy as we know it today?

If you believe that calendar year 2013 and subsequent years will be repeats of 2011 and 2012, when early-month hopes were dashed in the spring and summer by higher gas prices, ongoing regulatory uncertainty, and heavy-handedness, and gathering domestic and worldwide fiscal storms, your answer would be “no.” In that case, you would only want to consider how February 2012 and February 2013 compared to the rest of their previous 12 months.

If you did that, as seen above, you would calculate a two-year “seasonally adjusted” annual rate of 798,000 units (62,400 actual starts divided by 7.82 percent), a result which is a huge 13 percent below the government’s official number.

Instead of believing that the housing market is on the verge of breaking out, your take would be that the market for new homes is still treading water. Who’s right? No one can possibly know, and that’s precisely the point.

In housing, employment, unemployment claims, retail sales, production, and so many other areas, seasonal patterns which had been mostly intact for decades or had slowly evolved have been broken. Those who blindly rely on seasonally adjusted calculations — yes, I’m talking to you, business reporters in the establishment press — act as if none of this historic breakage has occurred.

In this uncertain economy, conscientious analysts and economists should be digging deep into the raw — not seasonally adjusted — numbers and attempting to interpret them. I see little evidence that this is happening. Their clients, and the public, are not well-served.

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Along with having a decades-long career in accounting, finance, training and development, Tom Blumer has written for several national online publications primarily on business, economics, politics and media bias. He has had his own blog, BizzyBlog.com, since 2005, and has been a PJM contributor since 2008.

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All Comments   (10)
All Comments   (10)
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Seasonally adjusted housing starts are up from total crap! To just crap. We are headed in the right direction!! sarc/off
With all the pandering by the press (and all their good news in the last 4 years) you might believe we are in a major boom.

It is almost beyond believe! The press is the enemy of our country, and us.
1 year ago
1 year ago Link To Comment
NOT! Counterfeiting, and printing money is like sugar rush. Most know what happens when it wears off kinda of like the caffeine rush. You crash!
1 year ago
1 year ago Link To Comment
1984's Ministry of Truth is here. Government keeps making up lies to cover up its failures and present them as successes. You just can't trust anything the government says.
1 year ago
1 year ago Link To Comment
It was the "flippers" who help to "flip" things up the last time and will "flip" it up again.
1 year ago
1 year ago Link To Comment
Curt, I didn't see much evidence of house flipping here in the suburbs North of Dallas. Right now it's a seller's market for starter castles with a limited number of houses selling within a couple weeks of being listed. Almost all the houses I looked at were currently occupied by families. I only saw one foreclosure and one short sale. Both were not selling because they were priced too high. Houses priced right get multiple offers within days. The supply shortage will be corrected with new construction, but houses take time to build and builders are being somewhat cautious as they restart construction.
1 year ago
1 year ago Link To Comment
Thanks for writing this post, Tom. This morning I heard the AP line that the housing market was rebounding. The proof? Home sales were on the rise, not be individuals or families, but investors seeking to become land lords.

That's improvement? More people will be renting homes. Yep, the POR economy chugging away through recovery.
1 year ago
1 year ago Link To Comment
The text is right, but the "Febuary Seasonally Adjusted Housing Start" chart had a small error.

Feb 1995 - Feb 2006 2008 AVG.
1 year ago
1 year ago Link To Comment
Thanks. Fixed. Gremlins.
1 year ago
1 year ago Link To Comment
Us unsubtle rubes don't know the difference between reeducation, relocation, and concentration camps. We don't know what inflation is now, or what it used to be. We don't know what unemployment means. We are informed by elites who think that our lack of bread could be fixed by eating cake. It is as if Humpty Dumpty fell down a rabbit hole.

"When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean—neither more nor less." Such is the language of our business and political elites.
1 year ago
1 year ago Link To Comment
All this is true, as Tom eloquently points out. But the Lamestream Media business press doesn't care. They helped get Obama elected. They did their work that was required of them. They don't want to print the truth about how abysmal the Obama economy is and has been for the past 4 years. Doing that prevents them from getting access to the Obama press minions. Their editors want stores about how rosy the economy is. Printing bad news denies them that kind of access. Besides, and Tom is correct, the business media is intellectually lazy and lazy, period. They want news releases. They don't want to actually have to dig for information.
1 year ago
1 year ago Link To Comment
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