New home sales rise as prices fall

[h82rent]

http://www.msnbc.msn.com/id/15028959/

I read this article today on MSN. At first (as someone who is hoping for a price crash), I didn’t think this was good news…

“Sales of new homes posted the biggest increase in five months in August, raising hopes that the steep slide in the housing industry may be leveling off.”

But then I kept reading…

“Sales of new homes were up in every region of the country except the West, where they dropped a sharp 17.7 percent.”

[PerryChase]

I hope that the news of the increased new home sales brings confort to the builders so they continue building. The more they build, the more choices we’ll have later.

[powayseller]

I wouldn’t read too much into the new homes sales yet. The data is always revised a few weeks later, and the last few months, the revisions have been down. New homes sales consist of contracts signed, and don’t include cancellations. I don’t know if the revised number includes cancellations.

Further, home price sales are cyclical, and one month does not make a trend. The fact is, we have an inventory glut, and months supply is so high, that pricing pressure continues to be downward.

I just found this post by Calculated Risk: “The previous months were all revised down, and the odds are Home Sales for August will be around or under 1 million units when the final estimate is released.”

[Anonymous]

With all of the incentives out there, it’s difficult to tell what is going on. I think things are worse than the report indicates.

Last winter was a little warmer than usual. Let’s see how the numbers hold up this year.

[powayseller]

” The headline news said sales rose last month. However, that was only versus the new, lower number. Against the original reported number, sales fell!” – Bill Fleckenstein, today

[justme]

Not to mention that the spinmesisters behind this article
very conveniently used month-to-month comparisons to get
their +4.2% sales volume change, whereas the year-to-year
change was -17.4%.

It is very convenient for the real estate propaganda machine
to quote YOY when that makes the market look hotter, and
then turn around and quote MOM to grasp for a straw of
improvement when the market has tanked.

And as someone already pointed out, the August MOM upturn
is suspect in and by itself.

[powayseller]

justme, you are absolutely right! I think yoy is more meaningful when we are discussing anything cyclical, such as real estate sales. However, I think the New Home Sales are released by the Commerce Dept. and the gov’t likes the month to month or quarter to quarter figures. It is up to astute observers like justme and Calculated Risk and Barry Ritholtz, etc. to point out the flaw in the numbers. Once again, the media merely reports what they are given, and don’t provide the analysis that makes sense of it all.

[Anonymous]

Watch out for the lies.

Unrevised July 1.072M
Unrevised August 1.050M
So between the unrevised number, it’s actually a drop of 2%.

Now what they did was to compare unrevised August with revised July. Remember, the revised numbers has been lower than the unrevised ones.

Revised July 1.009M (lowered from 1.072M)
Unrevised August 1.050M
Now, they are claiming 4% gain, instead of 2% drop.
Of cource the headlines proclaimed loudly 4% gain, and that
the worst is over, which is far from truth.

In any case, these numbers have high margin of errors. Also, they counted the number of contracts signed, but they did not substract the number of contracts cancelled, which can run higher than 30% for some builders.

[Anonymous]

The real story, in my opinion, is the June to July drop:

Actual/deseasonalized (using the San Diego seasonality factors):
June 101K/88.9K
July 85K/76.1K
August 91K/77K

So, the August sales of 91K (the 1.050M is an annualized number), after deseasonalizing to 77K, are above July’s deseasonalized number of 76.1K, so all is fine July to August (unless August gets revised downward).

The real story, to me, is the huge drop in deseasonalized sales, June to July: 88.9K –> 76.1K = a 16% drop in one month. Big cold spell in July!

Obviously, numbers bounce around month to month. But that June to July drop isn’t pretty.

[Author]

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