March 22, 2011
Some folks might have heard of it. We had an $8 trillion bubble in this market in the last decade. It led to a huge construction boom. The wealth created by the temporary run-up in house prices also led to a consumption boom. When the bubble collapsed, construction plummeted and consumption fell back to more normal levels. The collapse of this bubble has given us the worse downturn since the Great Depression.
Given the importance of the housing market for the economy it might be reasonable for the media to pay some attention to important economic releases. However, news outlets don’t seem to share that perspective.
The news of a 9.6 percent drop in home sales in February seems to have escaped the notice of the New York Times and the Washington Post. The Wall Street Journal noticed the decline but raised the unlikely possibility that bad weather was a major factor explaining the falloff in sales.
This is unlikely since the data reports the number of sales that were closed in February. Since it typically takes 6-8 weeks between a contract’s signing and the closing, most of the contracts for homes sold in February would have been signed in December and January. Weather would have only been a factor if bad weather at the end of the month had prevented people from coming in for a closing during February.
It is also worth noting that both the median and average house price fell sharply in the month. The median house price is now 5.2 percent below its year ago level.
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