NPR told us that there was good news in the increase in existing home sales reported last month. Sales did in fact rise, although it is reasonable to wonder about the extent to which weather was responsible. Sales in the Northeast rose by 11.3 percent. Since the weather for the months in which contracts were signed (December and January) was unusually good, this could explain much or all of the reported upturn. However, the bigger part of the story is the sharp price decline reported in the data. This price decline was somewhat obscured by the surge in sales in the Northeast, which has prices that are much higher than the national average. By region, over the last three months, median house prices have been dropping at annual rates of13.5 percent in the South, 21.4 percent in the West, and 25.6 percent in the Midwest. They rose at a 6.3 percent annual rate in the Northeast. The sharp rates of price decline are probably good news in the sense that they are part of a necessary price adjustment, but it's not clear that this is the reason the media gave them so little attention. Even now, few news accounts seem to acknowledge that the economy had a housing bubble which must deflate.
--Dean Baker
