Oh, man, Peter Coy at Business Week just went up a few notches in my book. As HP'ers know, we laugh at the monthly Census and NAR numbers which aren't worth the paper they're printed on - whether you're a bull or a bear. With dubious inputs and massive margins of error, the reports are a joke.
The Census new homes data, not many people know, reports commitments to buy, but doesn't report end sales or closings.
And as we all know, builders are seeing 40%+ cancellations, so the numbers are, you got it, wildly, hilariously overstated. And of course our biggest beef is the price data, which doesn't include incentives or cash-back.
Here's Peter's hilarious re-write of how the numbers SHOULD be reported with the margin of error noted:
Census Bureau Doesn't Know if Housing Starts Rose or Fell in December
Confusion over the state of the housing industry continued today as the Census Bureau once again said that it doesn't know whether the rate of construction of homes rose or fell in the most recent month.
The bureau estimated that starts rose 4.5%, but the margin of error was plus or minus 8.8 percentage points.
The same thing happened for October, where the estimated increase was 6.7% but the margin of error was plus or minus 10.1 percentage points.
On the bright side, we're pretty sure that starts really did increase in September, because the estimated increase then (14.6%) was bigger than the margin of error (plus or minus 7.6 percentage points).
January 26, 2007
Love it! Business Week reporter writes how the media SHOULD report the error-prone Census numbers but doesn't
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I'm still waiting for the press to attack the "average sales price versus average list price" statistic. All those price cuts never get counted, and as soon as the house goes under contract, they change the list price to match the contract price. Then, they feed it to the press as "we're getting 98.6% and the market is still going great!"
From Wall Street Journal:
All is Well!
Posted by David Gaffen
We’ve heard of trying to sugarcoat things, but this is ridiculous. The National Association of Realtors said sales of existing homes just ended their worst year since 1982, and NAR’s chief economist David Lereah’s comment is this: “Despite all the doom and gloom stories and dire predictions over the last year, 2006 was the third-strongest year on record for existing home sales.”
Now there’s an assessment that might even make Baghdad Bob blanch. Sales for all of 2006 dropped by 8.4% to 6.84 million, down from a record 7.08 million in 2005. That’s the sharpest drop since the 17.7% decline in 1982, when Ronald Reagan was occupying the White House. His first term. Roger Moore was playing James Bond.
It’s true — in terms of sheer volume, this was the third-strongest year after 2005 and 2004, but of course, the inventory of homes available for sale continues to rise as well. Average monthly supply was 6.6 months for all of 2006, compared with 4.5 months in 2005. Inventories rose 23.3% in 2006.
Meanwhile, executives at Beazer Homes, which reported a fiscal first-quarter loss this morning, might quibble with the view that housing is rebounding. “At this point, we have yet to see any meaningful evidence of a sustainable recovery in the housing market,” said Ian McCarthy, Beazer’s president and chief executive, in a statement.
http://blogs.wsj.com/marketbeat/2007/01/25/all-is-well/
Marketwatch reported it like you said:
link
Sales are reported when a contract is signed, not at the closing of the sale. Home builders have reported a large increase in cancellations in recent months. Cancellations are not reflected in the government data, so the reported sales are likely overstated.
The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common.
The standard error of 12.2% is so high, in fact, that the government cannot be sure sales increased at all in December. The 4.8% increase is statistically meaningless.
At long last. The minimum I expect to see is that the range is printed alongside the number. So today's new home sales should be reported as
"up in Dec. by 4.8% (±12.2%) over revised Nov. sales".
-K
So the housing numbers appear fudged? What else is new?
Look at the unemployment numbers.
Look at prices - are you seeing 2% inflation? Bought groceries recently?…well, that doesn’t count.
So the housing numbers appear fudged? What else is new?
Look at the unemployment numbers.
Look at prices - are you seeing 2% inflation? Bought groceries recently?…well, that doesn’t count.
"Anonymous said...
From Wall Street Journal:
..... Average monthly supply was 6.6 months for all of 2006, compared with 4.5 months in 2005."
Supply based on WHAT?! This drives me nuts!
What constant figure is used to establish that X% amount?
of housing inventory is available, for sale, at any given time period.
For instance, unless otherwise stated, modern inflation figures are usually assumed to be based on the year 1970. If you won the million-dollar lottery back then it’s only worth $116,000 today, that kind of thing.
With all the speculators and FB's going off the financial cliff toward foreclosure, how does that skew the number of buyers available at any one-time period, and WHO decides which direction the pendulum leans and by what amount?
I'm 83.6% sure I understand the article (+/- 21.9%). It seems to me that if a builder reports a sold home in August because a contract was signed, and then in September the buyer cancels and another buyer signs a contract for the same house, and then cancels, buy someone esle signs the contract, etc. etc., you could easily sell 6 or 8 homes on the same lot, but never close!
That, my amigos s why real estate never goes down!
So much for the printed media.
Tout TV (CNBC) continues to be breathless about today's figures. But nothing from those whores and pimps surprises me. I've given up on them.
In contrast, MSNBC has only featured the YoY new home sales numbers ( down 17.7% ) and built their 2 minute story around that. They totally ignored (correctly IMO) the Month on Month numbers.
That seems right to me; if you must exclude the dry stuff like error ranges, the flaky 90% confidence interval, the survey technique, error control, then for the sake of your integrity report the sound numbers and build your story on that.
Oddly, Lereah was really downcast and talked of the existing home sales downturn honestly on MSNBC ! So much so that the interviewer had to make some smoothing, supportive comment like : "Oh well, never mind, tommorrow is another day ( or something like that".
And who knows, one day, we will get the pretty faces on TV laughing out loud (LOL) at obscene spin like "Not catching Osama is NOT a failure. Its just a success that hasn't occured yet !" instead of solemnly nodding and thanking this abuser of their intelligence - those pretty faces must have some IQ surely and some at least of their self-esteem must be built around their mind; SURELY ?
-K
"those pretty faces must have some IQ surely and some at least of their self-esteem must be built around their mind; SURELY ?"
Why would they? All they've ever had to do in life is bob along on the tide of attention and fun from chumps who wanted into their pants.
I expect the NAR to put together a massive canpaign in the coming months, (much bigger than the last) to convince everyone that the spring is the time to buy a home. They have no other choice if they want to save there jobs.
If you think that the statictics are meaningless now just wait until they really start to spin in the spring.
I can see the NAR hiring Greg Swann as chief advertising consultant. Of course there will be cash back with every home purchase, a new Ford in every driveway and a chicken in every pot.
This is going to be desperation time.
On the bright side, we're pretty sure that starts really did increase in September, because the estimated increase then (14.6%) was bigger than the margin of error (plus or minus 7.6 percentage points).
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Well, that's just swell!
I'm glad that business can run soooo smoothly with proper accounting data!
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