An economics mystery has finally been solved.
By Tim Harford
Updated Saturday, Sept. 6, 2008
It’s still a miserable year to be selling a house.
In May, for example, U.S. house prices fell by 0.4 percent, according to the Office of Federal Housing Enterprise Oversight Index. (The raw data are here.)
Except: They didn’t.
House prices actually rose in May, albeit very slightly, according to exactly the same source.
Why the difference? The first number is the result of “seasonal adjustment,” an attempt to strip out predictable calendar patterns and report just the underlying trend. House-price indices are presented in seasonally adjusted form by researchers and reported that way by the media. That makes some sense. For anyone trying to understand the big picture, predictable seasonal gyrations just get in the way.
But for anyone trying to buy or sell a house, predictable seasonal gyrations can’t be ignored. Nobody pays a seasonally adjusted price. If you spend $500,000 on a house in a typical February, you might expect to have paid $515,000 had you waited until August. That $15,000 is money in your pocket…
