Last year's total new-home sales in a region were 600,000. A Census release now reports March new-home sales at a seasonally adjusted annual rate (SAAR) of 660,000. Which statement is a valid reading of these figures?
Correct Answer
C) March's SAAR ran 10% above last year's total sales
A SAAR is the seasonally adjusted monthly value multiplied by 12, which lets a single month be compared with an annual total. A 660,000 annual pace is 10% above last year's 600,000 total. It is not March's actual count, it is not a forecast for the year, and it compares with last year's annual total, not with last March.
Why This Is the Correct Answer
Option C is correct because a SAAR can be compared with an annual total: March's 660,000 annual pace is (660,000 - 600,000) / 600,000 = 10% above last year's total of 600,000.
Why the Other Options Are Wrong
Option A: March's actual sales count equaled 660,000 houses
Option A says March's actual sales count was 660,000 houses. The SAAR is the seasonally adjusted monthly value multiplied by 12, so the March figure itself was about 55,000 on a seasonally adjusted basis.
Option B: This year's total sales are projected to reach 660,000
Option B treats 660,000 as a projection of this year's total. Census states the seasonally adjusted annual rate is neither a forecast nor a projection; it describes the pace in that month.
Option D: March sales ran 10% above sales in March of last year
Option D compares March with March of last year. The facts give last year's annual total, not last March's sales, so a 10% year-over-year monthly change cannot be drawn from them.
SAAR equals monthly times twelve
A SAAR is one month's seasonally adjusted pace scaled to a year, so it lines up with yearly totals but does not predict them.
How to use: Use this when a question asks how to read or compare a figure reported as an annual rate.
Exam Tip
Watch for options that turn a SAAR into an actual monthly count or a forecast; neither reading fits the definition.
Common Mistakes to Avoid
- -Reading a SAAR as the month's actual sales count
- -Treating a SAAR as a forecast of the year's total
Concept Deep Dive
Analysis
The question tests what a SAAR can and cannot be used for. Multiplying a seasonally adjusted monthly figure by 12 puts it on an annual scale, so it can be compared with an annual total. It does not describe the number of homes sold in that month, and it is a description of that month's pace rather than a forecast.
Background Knowledge
Census publishes many monthly construction and sales series as seasonally adjusted annual rates. The annual-rate form allows month-to-month comparisons and comparisons of a month's pace with an annual total, while seasonal adjustment removes recurring calendar patterns.
Real-World Application
In a market commentary, an appraiser notes that the latest monthly new-home sales pace, stated at an annual rate, is running above last year's total. The appraiser presents it as evidence of current demand strength, not as a prediction for the year.
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