Analyse This!

Home Sales Sink As "Market Continues to Slide Away".

That's the front page lead in to an article in "Hawai'i's Business Today, a business section insert in the Honolulu Advertiser, my local morning paper. The article is captioned with the header, "Prices to keep Falling, Analysts say." Then of course, the next three full columns spew out the doom and gloom rhetoric that apparently, makes good copy and sells lots of newspapers.

You know how the article reads: "The National Association of Realtors reported yesterday that existing home sales dropped by 1 per cent to a seasonally adjusted rate of 4.89 million units, matching the all time low set in January... The median price for an existing home dropped 8 per cent, compared with a year ago, to $203,300. It was the second largest price decline on record and analysts predicted prices would fall further in the months ahead....etc."

The media loves to 'report' this type of data. They've been doing it for months now. If you've read these articles with a critical eye, you know you have to read the entire article to actually get the facts. In Three full length columns, you have to get to the middle of the third column before you can find the part where the 'report'  states that "Sales were up 6.4 per cent in the West."

The third to last paragraph tells the true story. Lawrence Yun, chief economist for the Realtors, said that sales would start to rebound in the second half of this year as more types of mortgages become available, including programs supported by mortgage giants Fannie Mae and Freddie Mac and the governments Federal Housing Administration.

Anyone notice, first they say that analysts predict that prices would decline further in the months ahead, then actually quote an analyst as saying that the second half of this year would see a rebound in the market. By the way, the second half of this year starts in just about 5 weeks.

When you see prices still declining, and unit sales beginning to flatten out, this is the watermark of the market shifting from Stage 4 (market bottom) to Stage 1, the beginning of a market upswing. For more about market stages, go to my blog, "Are You Ready for a Market Rebound?" 

So you see, that's why I suppose I could never be a newspaper editor. Given my interpretation of the news, I would have entitled the article "Good News Ahead for the Housing Market". But that would not sell enough papers, which is the point of being in the newspaper business.

Anyway, at least that's my analysis.