Yesterday the National Association of Realtors released data showing that the pace of home sales in February surged 9.5% to a seasonally adjusted annual rate of 4.38 million. Consensus had expected a 1.3% drop. Instead, this was the the largest monthly increase in a year.

I think some of the best news in this data was not widely reported.

Here are 3 charts that describe positive—but mostly overlooked—aspects of yesterday’s numbers.

Chart 1: The non seasonally-adjusted data was even better

A lot of economic data is seasonal, but especially so in real estate (people tend to want to move in the summertime, when the kids are out of school). The NAR bases¹ its seasonal adjustments on the “X-13” methodology developed by the Census Bureau.

But, especially after major shocks (pandemic, anyone?), accurately adjusting seasonal factors is extremely challenging². As the NAR writes, “for everyday practitioners, simple raw counts of home sales are often more meaningful than the seasonally adjusted figures.”³

In several of the recent releases, the seasonal adjustment probably understated the strength of the data. This was again the case with the most recent release. Measured year-over-year, the seasonally-adjusted change in sales was -3.3%. Without the adjustment, it was +0.7%.⁴

Chart 2: Strong momentum

Sales rise in the summer and slow in the winter. February is typically a very slow month. But this February was much less slow than usual.

The chart below looks at the change in sales from August to the following February. Sensibly, all the lines are downward sloping because sales always decline over this period.

But what’s interesting is that the magnitude of the slowdown into this February was much smaller than usual. In fact, over the past 24 years, in only one year (2011, as we were emerging from the GFC) was momentum better than it was this past February.

Chart 3: This downturn is already pretty long in the tooth

Perhaps you’re familiar with the term “dead cat bounce”—the phenomenon where prices rise, seemingly breaking a downward trend, only to fall again. Was the surge in sales in February one of these?

Maybe. During historic downturns in the housing market, it’s more common than not for sales to interrupt their downward path and rise for a few months, before continuing to fall. In fact, we’ve already had a couple of dead cat bounces in the current downturn.

But there are 3 reasons the sales jump in February may not be a false dawn:

1. Historically, the resumption of a downward trend after the initial bounce is typically caused by a specific catalyst. In the 2005-10 downturn, it was the expiry of Obama’s homebuyer tax credit. In the current downturn, it was the Fed. By contrast, there is now no clear catalyst to push the housing market down over the coming months. Instead, there is one very important positive catalyst: the Fed cutting rates. The consensus view is that this happens in June.

2. This downturn is already pretty deep by historical standards. Only the housing crisis in the late 70s and the GFC saw steeper falls in sales.

3. This downturn is long in the tooth: at over 40 months, it’s still short of some of the biggest historical housing slumps—but not by much.