To err is human, but some errors are more obvious than others.
One pretty obvious error occurred Tuesday at the Associated Press. It involved veteran economics reporter Christopher Rugaber, who somehow assumed that the August increase in home prices recorded in a well-known index published on Tuesday primarily occurred because of "solid sales." The problem is that seasonally adjusted existing home sales declined sharply in August.
The index involved, known as Case Shiller, is really a collection of 20 large metro area indices combined into a composite nationwide index. Today's related release from its publisher, McGraw Hill Financial, reported that "The 20-City Composite’s year-over-year gain (in August) was 5.1% versus 4.9% in the year to July."
Case Shiller didn't tell readers why such increases have occurred. Conditions will vary from city to city. One city's supply of homes might be low, to the point where even a relatively low volume of sales can still result in higher sales prices. Another city may see a big increase because buyer demand has really picked up to stretch even an expanded supply of available homes.
The fact that Case Shiller didn't cite sales volume as contributing to August's increase in any way, shape or form didn't stop Rugaber from assuming that increased sales caused the price index's upward move:
Again, the release presented no evidence that "solid sales" drove the increase.
In fact, there's reason to believe that there had to be something else at work to cause the 12-month period uptick to go from 4.9 percent in July to 5.1 percent in August. That's because seasonally adjusted nationwide sales of existing homes fell 5 percent in August (information is from the National Association of Realtors' September report, which slightly revised August's original annualized figure of 5.31 million):
If anything, the nationwide decline in sales volume should have softened year-over-year price increases. That said, Case Shiller covers roughly half of the nation's home sales. It's conceivable (but not likely) that sales volume didn't decline in most or all of the 20 metro areas tracked. But Rugaber didn't present any evidence to that effect. Since he didn't, the default assumption is that he didn't have any. It appears that the AP reporter just engaged in unsupported speculation.
One of these days, someone in the business press will decide that it's a good idea to simply report the facts and save the "analysis" for people who make a living from analyzing. Until then, periodic embarrassments such as the one described here will continue to occur.
Cross-posted at BizzyBlog.com.
