The latest housing numbers are sobering reminders that recoveries don't simply move in one direction - especially when you measure them month to month.

The Commerce Department's announcement that new home sales plunged by 33 percent in May from April sent the stock market down and set off howls among Wall Street's professional doomsayers.

The new home sales report came just a day after the National Association of Realtors announced that sales of existing homes and condos had also fallen in May - down by 2.2 percent from April.

So what do we make of all these negative numbers?

For starters, consider this: Both sets of monthly sales declines didn't occur in an economic vacuum. They were the inevitable result of federally-imposed deadlines for signing contracts to qualify for the housing tax credits.

There's no question that tens of thousands of people pushed their schedules forward and signed up before the April 30 deadlines for the $8,000 and $6,000 credits.

That was reflected in previous months' higher sales totals for new and resale homes. Lower numbers for May and June were widely predicted for both categories of sales.

Now it's true the 33 percent seasonally-adjusted drop in sales of newly-constructed houses was beyond what anyone forecast.

But even David Crowe, chief economist for the National Association of Home Builders, wasn't shocked.

Likening it to "a hangover" from a binge, he said the really significant forces for housing are at work in the larger economy - rising consumer confidence, slowly rising employment, and record-low interest rates.

During the second half of the year, he said, these will bring buyers back to the market for new homes.

But what about the 2.2 percent drop in resales of existing homes?

Well, that was actually a smaller decline than many analysts had expected in the wake of the tax credit phaseout.

More importantly, though, home resales in May were nearly 20 percent higher than the year before.

Median prices in 16 of the top 20 markets were higher, including a surprising 7.4 percent increase in the Western region.

There were important indictors of ongoing recovery elsewhere as well: The widely-followed Corelogic housing price index gained 2.6 percent in the latest month nationwide.

Sixty of the top 100 metropolitan markets are seeing positive appreciation, according to Corelogic -- and that's a huge contrast with a year ago, when all 100 of the same market were reading negative.

So, don't get bowled over by a month's worth of sales numbers. Look at the longer-term pattern -- and you'll see that the needle is pointed positive, even if it bounces around now and then.

Published: June 28, 2010

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.