New and 'organic' existing home sales agree(Read article summary)
Once "flips" and distressed sales are omitted from existing homes sales figures, there is agreement between new and existing sales.
The methodology employed by S&P vets out “flips”, new construction and even most distressed sales providing them with a solid base of true “arms-length” sales for which to base their more popular home prices series on.
As has been widely reported, some 30%-40% of all existing sales (as reported by the NAR) are distressed properties resulting in a significant gap between the trends in new and existing home sales.
Existing home sales have been essentially propped up by the high volume of distressed properties resulting in a poor indicator of the true trends for non-distressed typical existing home sales.
Yet, looking at the chart (see above) which compares the seasonally adjusted new home sales series and the non-seasonally adjusted S&P/Case-Shiller Composit-10 sale pair count series, both smoothed with a 12 month simple moving average, you can see that there is a great degree of correlation between the two trends.
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