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A velocity-focused view of the home sales market

By MKTG_Admin

When thinking about the home sales market, I find it useful to look at the relative velocity of sales.

This metric captures just how significant the slowdown in home sales was over the past few years, and how strong the recovery has been in 2009.

Since 1999, the number of homes sold in October has been 48% higher than the number of homes sold in January, on average.

Screen shot 2009-11-25 at 11.44.25 AM.jpg

The home sales market performed within a relatively narrow band from 1999 to 2005. In 2006, however, October home sales were only 16% higher than January. The market had come to a virtual halt.

In 2009, October sales are 94% higher than in January.

From month-to-month, the relative velocity of home sales follows a fairly predictable pattern. The next chart shows sales from July to September for each year in the past decade.

2009 is clearly an anomaly, inasmuch as there has been minimal drop-off in home sales at the beginning of fall.

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Clearly, the impending expiration of the government housing tax break in November helped to sustain the market velocity. While it's likely that the rate will slow into the winter, the artificial stimulus has had the effect of re-charging the home sales market. Inventory has been worked off and the gap between seller and buyer price expectations has narrowed.

Going into 2010, we have the dynamics of a normalized housing market in place.

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