I’ve been doing my analyses without adjusting the raw sales data for (monthly) seasonality. Tonight, I adjusted for seasonality.
Prior peak: June 1988
Prior peak, after adjusting for seasonality: September 1988
Prior trough: February 1995
Prior trough, after adjusting for seasonality: April 1995
Current peak: June 2004
Current peak, after adjusting for seasonality: April 2004
Thus, it appears to me that adjusting for seasonality of the sales data doesn’t markedly shift peak and trough months, only moving it forward or backward 2-3 months.
Moral of the story: raw sales data is adequate for eyeballing peaks and troughs; it’s not necessary to adjust for seasonality.
But, in case you do want to adjust for seasonality, here are the factors, based on the ’88-’06 sales of San Diego resale homes:
January sales are 28% below average (slowest month)
February sales are 25% below average
March sales are 5% above average
April sales are 7% above average
May sales are 9% above average
June sales are 19% above average (busiest month)
July sales are 14% above average
August sales are 15% above average
September sales are 2% above average
October sales are 3% below average
November sales are 12% below average
December sales are 5% below average
Good stuff JG,
For months I have claimed the peak was between April 2004 and June 2004. Powayseller has corrected me saying I was wrong dozens of times and that it was in Summer 2005. I said I knew it because of my gut instinct of being there. She has insulted me time and again saying someone who goes by their instincts is delusional. I do plenty of analysis and hold a handful of graduates degrees from prominent top tier universities. I have continually warned you all that the data is absolutely horrible and not to put too much emphasis on over analyzing it. The data is a constantly moving target. How can you compare prices from a year ago with prices today that are laden with incentives. Answer: You cannot! My gut has served me well in my career and has earned me far more than any of the degrees I’ve earned. I always laugh at people who think they should make lots of money because they are smart. Being smart is helpful but what really matters is having the convictions to act on your beliefs rather than sitting back paralyzed in fear.
BTW, taking money off the table is not acting on one’s convictions, its taking a profit. Creating wealth necessitates putting your chips on the table. It is what Chris Johnson does, it is what Docteur does and it is what many on this board do. Many but not all.
I used to say that the peak was summer 05, because that’s what Rich was telling us. He was adamant that summer 05 was the peak. About 4 months ago, I changed my mind, based on the inventory data and observations from Bob C. Since then, I have been saying the peak was in spring 04, and I have written at least a dozen posts about that. Quick refresher: change in inventory, and the ripple effect. No gut feeling needed; the data is all there if one knows where to look. For SFH, the peak was in summer 05, as the ripple effect took one year to work up. These charts, as well as the charts I am working on, corroborate that spring 04 was the peak for this cycle. Understanding the ripple effect on the way down would have given any seller the time needed, one year perhaps, to sell.
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