We are continuing our 5 part series, Reading Housing Data 101, to help you better understand quoted housing statistics and avoid taking others’ conclusions at face value. We dealt with the distinction between local vs. national data, and seasonality, now let’s tackle the difference between quarterly and annual comparisons.
Quarterly or annual?
Please try to avoid placing too much credence on quarter-on-quarter data comparisons. This completely neglects all industry seasonality (remember the rationale for using seasonally adjusted data). Further, remember that the data of one quarter reflects the activity of the previous quarter (as it now takes 1-3 months to close after contracts are signed.) I.e. Housing data is always lagging. The data we read one quarter reflects the activity of up to 6 months ago.
The more important comparison is year-on-year (y-o-y) data. How are we doing this month versus the same month last year? Now, even though y-o-y data is the gold standard, it begins to fall apart a bit during anomalous times (such as this year) or when the local market changes dramatically from year to year.
You just have to look on the Lower East Side or Midtown to understand that a burst of new condo developments can easily sway data from one year to the next. No, rental prices didn’t increase 50%; rather, additional inventory of shiny new doorman condos came online that was previously non-existent in last year’s data which was driven by walk-up, older properties.
Another example is will be found in Q1 data of 2010 as compared to Q1 of 2009 on the buy side. Can you guess how that’s going to look year on year? Brace yourselves for the likely headlines to follow and the potential talk of NY real estate having turned the corner.
