September 27, 2006

FLASH: Homebuilder firesale produces 4.1% increase in unit sales (maybe - nobody knows), prices tumble to unknown level due to rampant incentives

While the MSM is reporting home sales rebounding, and a 4.1% increase in new home sales, HP of course gives you the correct headline. This report is statistically meaningless, fraught with error, reports a totally bogus price number, and really isn't worth the paper it's printed on. Yet we all report it for some reason..

Here's one report that at least took the time to mention the issues, versus the rest of the rip-and-read lazy MSM

New home sales rise 4.1% to 1.05 million pace - Median sales price down 1.3%, first yearly decline in three years

WASHINGTON (MarketWatch) -- Sales of new homes unexpectedly increased 4.1% in August to a seasonally adjusted annual rate of 1.05 million from a three-year low in July, the Commerce Department reported Wednesday.

Sales are down 17.4% in the past year and are down 23% from the peak last July.

Sales in May, June and July were revised sharply lower. July's sales pace was revised to 1.009 million, the lowest since March 2003, from an earlier 1.072 million.

The median sales price of a new home fell 1.3% year-on-year to $237,000, the first year-on-year decline since 2003. The reported sales price does not account for the massive incentives builders have been offering to close deals.

Despite the sales increase in August, there's little reason for near-term optimism about new home sales, economists said.

"Builders are extremely pessimistic," Brian Bethune and Nigel Gault, economists for Global Insight, said ahead of the report. The home builders' sentiment index has plunged to a 15-year low, while housing starts have fallen 19.8% in the past year to a three-year low.

The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common. The standard error is so high, in fact, that the government cannot be sure sales increased at all in August. The 4.1% increase is statistically meaningless.

32 comments:

Anonymous said...

• Housing slump scenarios

Sept. 25: Yale economist Robert Shiller tells CNBC that he expects home prices to fall 6 to 8 percent in the U.S. over the next year — with steeper declines possible in some markets.
MSNBC

http://video.msn.com/v/us/msnbc.htm?f=00&g=6b9342ba-9ab6-4cff-ac5d-8e5b42d5a0de&p=Source_CNBC&t=s55&rf=http://www.msnbc.msn.com/id/15016057/page/2/&fg=

Anonymous said...

now there's a headline

I love blogs! fcuk the msm!

Anonymous said...

Hahahaha! Oh ye of little faith! You dared doubt the powers of the Fed and BoJ to pull our chestnuts out of the fire once again. Get a clue:

When a system can create "instant" money, and then pump it into the economy efficiently through multiple channels, the chance of a sudden collapse in any asset class is close to ZERO!

Look at the facts, when was the last time the DOW declined more than 2% in a single session? 1993? Banks are opening new branches at a record pace, and M3 is no longer published. Do you think that's a coincidence?

Party hearty boys and girls!

Trevor Cordes said...

Recap from my post on previous topic, now that Keith picked up on this insane report:

FLASH! Don't believe the NEW HOME stats today! As in previous months, the revisions to the prior months mask the real story. The headline number touted by the MSM is 4.1% increase in new home sales in August. But concurrently July was
revised down from 1072 to 1009: 5.9%! June and May were also revised down. So while MSM claims triumph and an excuse to drive the DJIA to an all-time high, the truth is really ugly.

I just hate how these statisticians blatantly lie every month on these numbers by constantly downwardly revising the previous month. In essence they are getting the negativity in the prior number for "free". Heads they win, tails you lose. Given the large margin of error, how come the number is never reported *lower* than it really is and then revised *up* the next month? Strange how that has not been happening recently. Coincidence? I think not.

New home sales SA:
month/revised/previous/%lie
May 1101 1130 2.5% lie
Jun 1091 1120 2.6% lie
Jul 1009 1072 5.9% lie!!
Aug 1050

Months supply based on the July revision hit 7.0! August is reported as 6.5. Anyone want to bet that when the Sep numbers come out that the "surprise" downward reivision to Aug makes it truly ugly? Over 7.0 supply? Under 1000 units?

Trevor Cordes said...

Also, if July had been reported with the true (revised) numbers, the M/M unit sales decrease would have been 7.5%! Imagine that number posting on CNBC! But alas, the lietistics are fudged every month to hide the horrible truth. The revisions get mentioned in a low-key footnote, if at all.

I do want to give credit to Steve Leisman on CNBC for actually figuring this out and reporting on it, albeit 15 mins after the 4.1% number was touted ad nauseam and no one was paying attention any longer.

keith said...

gee, the government always errs on the high side (and the media reports it), then revises lower (and the media doesn't report it).

hmmm... hmmm....

Anonymous said...

also notice that if not for the july revision, they would have had to report a decrease in new home sales.

it's almost as if they revised the july numbers lower in order to report the 4.1% july increase.

if i am reading it correctly that is.

Anonymous said...

i meant the above to read "4.1% august increase".

gregor said...

Bogus numbers. According to those numbers there was 22% increase in new home sales in the Northeast? BS. Even CNBC anchor didn't believe it.
Now, how the hell stock market goes up when durable goods indicator dropped for the second month 0.5% ?
Yesterday consumer confidence rose from 100.2 to 104.5. Damn it, how? OK, I forgot. Kids went to school, more spending.
Well, it seems to me that whatever is going on with the stock market now, has to be called the "ellection factor". LOL.

Anonymous said...

the blog entry, complete with table, can be found here: http://blog...

How "Median Home Price" can mask market weakness


Our government uses the National Association of Realtors' median sales price to gauge the health of American real estate prices. I think they may want to develop a new method if they want accuracy. The table below uses Orange County's Q2 median home sales to demonstrate the errors we are liable to run into when using the median price to determine the "average" health of a market in which speculators are leaving.

According to the data, in Q2 2006, the median price of all homes in Orange County rose 2.6% year over year. Yet look at the median price of resale houses, condominiums, and new homes. Every segment of the housing market grew at a slower pace then the supposed "average" price of 2.6%. The price of resale houses only grew 1.5%, condominiums just 0.4%, and new homes were down -1.5% - but yet when these three groups are combined median prices were...higher?



How can this be? It all comes down to flippers leaving the housing market. The flippers like cheaper priced resale homes and condominiums, but they decided to stop buying them this year, and Orange County sales volumes dropped for these properties 30.3% and 40.6%, respectively. The sales volume of more expensive new homes, less likely to attract flippers, only dropped 15.2%. That means, as a share of total sales volume, the more expensive didn't lose buyers as much as the less expensive homes. The more expensive homes that get bought relative to cheap homes, the higher the median sales price will be – even if the median price within the expensive homes subset is negative, like we see in the Orange County data.

So therein lies the fallibility of using the median as an average for home prices. Conceivably, the market price for all homes could be much worse, but if we take the median as the only gage of average price, the distortion that measurement causes would mislead us to believe things are fine. It's not hard to think of a situation where home prices register negative for all sections of the housing market, but an exodus of speculators keeps the median price positive.

So, if Orange County is any indication, it ironically looks like the departure of home flippers from the hot real estate markets may temporarily have a supportive effect on median home prices.

Jip said...

Three words:

DEAD CAT BOUNCE

Even a dead cat will bounce when dropped from a great height...

Anonymous said...

keith, i think you have to expedite the launching of your book. it's about time to tell the truth.

Anonymous said...

this is a conspiracy. remember lereah was saying that the market has bottom out and will recover soon? this is it.lol

FORCLOSE YOU said...

Our book has to be published now
We have been predicting this for a long time. Let's get the credit we desrve.
Keith if you are serious about pblishing a book contact me.

haggis said...

I suspect David Lereah has taken note of the Henry Blodgett saga.

Blodgett was toasted for holding private views which shamefully conflicted with his oh, so public, enthusiasms for dot.com crap.

Mary Meeker, on the other hand, gracefully piroutted through the whole saga because she apparently fully believed the bullshit she was spouting.

DL will no doubt plead an everybody believed it defence of his nonsense. And he is no doubt actively muddying the waters to that end.

If the glass is half full, he's a fool. If the glass is half empty, he's a shameless cynic.

Neither is a reputation which bodes well for his future career or credibility.

Cheers.

haggis said...

I suspect David Lereah has taken note of the Henry Blodgett saga.

Blodgett was toasted for holding private views which shamefully conflicted with his oh, so public, enthusiasms for dot.com crap.

Mary Meeker, on the other hand, gracefully piroutted through the whole saga because she apparently fully believed the bullshit she was spouting.

DL will no doubt plead an everybody believed it defence of his nonsense. And he is no doubt actively muddying the waters to that end.

If the glass is half full, he's a fool. If the glass is half empty, he's a shameless cynic.

Neither is a reputation which bodes well for his future career or credibility.

Cheers.

Anonymous said...

blahblah blah, were bored adults looking for somthing to do with the internet, wich we dont understand. were having fun pretending to be rich and blathering on about politics we have no control over. we have no lives.

borkafatty said...

So if it is meaningless, why would they post it like its the biggest thing since sliced bread? Oh I know more mind games. nothing to see here move on...

Just dont bend over to tie your shoe there is an anonymous lurking.

borkafatty said...

Anonymous said...

blahblah blah, were bored adults looking for somthing to do with the internet, wich we dont understand. were having fun pretending to be rich and blathering on about politics we have no control over. we have no lives.

--------------------------------

What home sales got you down..here shine my shoes, and while your at it my silver collection is tarnishing shine that to...checks in the mail.

Trevor Cordes said...

anon 4:47:56 PM -- exactly right. Instead of the 2% decrease the headline would have been had they not magically revised July lower, they get to procalim a 4.1% increase! Hah! This crap makes me sick. Never take the "headline" numbers at face value until you look at the raw numbers and the prior revisions. I track about 30 different statistics on crashing housing and inflation and there is a growing trend in these "lucky" revisions that always seem to make the new number look better than it really is.

But, hey, it works for the exact reason that 99% of people will NOT look at the raw numbers and just believe whatever the headline tells them.

Looks like a few people are wising up today though ... anyone watching the homebuilding stocks? Really nice pop & drop today! Keep an eye on them...

InfidelWoman said...

blahblah blah, were bored adults looking for somthing to do with the internet, wich we dont understand. were having fun pretending to be rich and blathering on about politics we have no control over. we have no lives.

By Anonymous, at Wednesday, September 27, 2006 7:24:05 P

Sorry guys, My 15 year old cynical son who ribs me endlessly for my HP Pleasure hijacked my computer.
Please disregard the post. (:

IW said...

PS HP is anything but boring.

IW said...

Funny Bork; I will have him read it when he gets home.

InfidelWoman said...

Hey Butch,
Did you read this post "The housing wail" on the Sept Thread above? it is one of the new comments near the bottom.
Waddya think? SHill or not a Shill?

Nicolas P. Retsinas is director of the Joint Center for Housing Studies at Harvard University.)



(Distributed by Scripps Howard News Service, www.scrippsnews.com.)

Wednesday, September 27, 2006 8:50:13 PM

IW said...

Never mind. He Posted Twice. duh.

Anonymous said...

So therein lies the fallibility of using the median as an average for home prices. Conceivably, the market price for all homes could be much worse, but if we take the median as the only gage of average price, the distortion that measurement causes would mislead us to believe things are fine.

-------------------------

Median home prices are a joke. I have to live in the Chicago limits. Find me a home for $233,000 with out bullet holes in it!

Anonymous said...

I agree Trever, the CB "modified" that report to look like it was a increase, when in reality it will be another decrease from August. This country is stupid.

Anonymous said...

With all the incentives offerred, it is no surprise that the number of new homes sold may go up. But I don't believe the numbers. Just look at the price for existing house down 1.7% in August. So that about a 20% drop if you multiply by 12 months. Or 60% for 3 years!
And by the $100k price reductions I see in So. Cal., I believe the existing sales are the closest!

Anonymous said...

yout all so fake, your entire life is a lie. there is no housing bubble, your a bunch of self absorbed cads with nothing better to do than blog endlessly about realestate. i truly pity you all.

Anonymous said...

"this country is stupid."

you're right, because everything we do, we center ourselves towards spinning. we are so defensive about our actions that we always try to cover it up, deny it, instead of focusing on a solution.

for example, there's a blame game goig between the clinton admin and the bush admin on who put more effort in trying to capture or kill bin laden. it's a joke. bin laden is probably enjoying the he said - i said or he said - she said finger pointing.

Anonymous said...

i truly pity you all.

Isn't there a blog for depressed, mean RE Agents and Flippers. It's Not Here.
Go flam some other blog.

or

Shouldn't u go check all your listings and flips?

Keith,
Stoopid Question?. Wht do RE Agents Post their links to your Blog?

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