Cancellations Distort Results
This from Real Trends: “Cancellations of new home sales are distorting the housing market, making it appear that things are better than they are, says Mark Zandi, chief economist at Moody’s Economy.com. If a contract to buy a home is signed in November, then cancelled in December, the Census Bureau does not subtract the failed transaction from the number of sales. In the last year, as the housing market has cooled, the volume of cancellations has risen to epidemic proportions. New homes on which contracts are cancelled are not added back into the inventory figure. The most recent report found that the seasonally adjusted estimate of new houses for sale at the end of November was 545,000, or 6.3 months of supply. Given the high rate of cancellations, Economy.com says it’s likely that inventory is substantially higher.”
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