What Is A “Seasonally Adjusted Annualize” Data Figure?

September 4, 2008

What does it mean when media reports the number of home sales on a "seasonally adjusted annualized basis"? That’s a question being asked by many consumers. The annual rate of existing home sales has been near the 5 million mark since September of last year. But the "seasonally adjusted" reports can vary and they can be confusing. Lawrence Yun, chief economist for the National Association of Realtors, explained it in simple terms.

"All economic data - the GOP, durable goods orders, employment - is reported on a seasonally adjusted annualized bases," he said. "The reasoning is simple. Economists and policy makers need to assess trends that are not influence by normal seasonal fluctuations."

As an example, Yun cited gasoline prices. Over holiday weekends those prices go up as folks head for the nation’s highways. Therefore, the short-term run-up in gas prices is normal and should not be viewed as inflationary. Those higher prices do not imply a fundamental shift in the direction of the economy. They are normal, thus the reported data is seasonally adjusted to show no real change. Likewise, home sales data is seasonally adjusted to account for the usual monthly changes.

Also, economic data is annualized. That is, if the home sales pace was to continue at the same pace for the next 12 months, this would be the annual tally. This is done to help quickly compare monthly data with annual data, Yun noted.

Posted in Real Estate