The New Home Sales Report came out last Friday, and we were told that December prices were up:
The median home price — half sold for more, half for less — rose to $235,000 in December from a downwardly revised $232,200 in November, the Commerce Department said.
The MSM generally neglected to report it, but while the month over month was up, prices were down 1.5% year-over-year. Also of significance, the MSM has the habit of allowing the old revised numbers to fall into the "black hole" of cyberspace, mentioning "downwardly revised", but not giving the former value. This erases important context and can make the reported rise or fall in price an apples-and-oranges comparison.
The November report made the same claim of rising prices. However in November there was a positive YOY number, so apparently the media managed to squeeze that number in:
The median price of a new home sold last month [November] rose to $251,700, up 3.2 percent from the October level and 5.8 percent higher than a year ago.
Do you see a problem here? Last month’s 3.2% price increase- one of the "signs" we were told showed the market was improving- apparently didn’t happen. The November median price was revised from $251,700 to $232,200 for a 7.7% downward revision. October’s median price (unrevised) was $248,500 or (revised) $243,600- whichever suits your spin. Either way, if you used the revised November number, prices were down from the previous month, not up 3.2%. Year-over-year then, the revised prices were DOWN 2.4% YOY, or 4.7% MOM. These numbers are not adjusted for inflation, and do not reflect builder incentives.
At any rate- Here, for what it is worth, is what the graph looks like: [October and November 2006 numbers have been revised. Data from the Census Bureau.]
I don’t think there is some sort of "media conspiracy" to withhold the truth here. I suspect it’s just easier to repeat the National Association of Homebuilders talking points, than to do the research and report the whole story. Check back next month and we’ll try taking a look at the December numbers again, and see if up is now down, or whatever.
Oh and by the way, that 4.8% increase in sales in December?
There have been some signs that the steep slide in housing may be coming to an end. For December, new home sales were up 4.8 percent, the second strong monthly gain after a 7.4 percent rise in November.
That had a ±12.2% margin of error, so that’s suspect as well. You don’t even want to get me going on that one….
Great work, Twist.
And here’s the kicker: with all the fraud going on, and the sales incentives that don’t get counted, we know these downward-revised numbers are bogus as well.
Every newspaper that ran the previous story should have to publish an update, showing the real numbers. Of course, when they can’t even be bothered to include the “margin for error” in their stories — which in many cases is not an insignificant statistic — I won’t be holding my breath waiting on any revisions from the previous bright and cheery “market-has-stabilized” stories.
– The Judge
“Remember, sell now or be priced in forever.”
Twist -
Looks like this little trick may be more widespread than we thought. I’ve just put a 310 story cluster up about rising US “consumer confidence”, but here again the headline trend is that same apples-and-oranges comparison between this month’s raw figure versus last month’s revised, with the old raw number nowhere to be found.
“Behind Consumers’ Growing Confidence: With gas prices down and the job market up, consumers are feeling better about the economy”, by Pallavi Gogoi, BusinessWeek, January 31, 2006.
thanks.
it looks like the quality of dozens of us numbers are worthless and missleading.
no wonder the fed is often behind the curve……
The NAR also periodically revises their existing home sales report, also generally with a note saying “revised,” but not providing the old value.
Twist -
I mentioned this stats scam over at Ben’s Bits this morning, where I termed it revision boost.
The post is great, but the sidebar today is wonderful! The NYNY, both Wire Guys, Mr. Winter, the post on “Shotgun Fraud”, even Jan-Martin’s Cartoon, are all well worth the effort. Amazing stuff.
Hat tip to commenter MazNJ from Ben’s who seems to have found that the revision was up.
A bit off-topic, but I continue to be baffled by MSM stories like the sidebar posted today: “Valley new home shows signs of stabilizing.”
http://www.eastvalleytribune.com/index.php?sty=83184
Just because builders take out 55 percent fewer permits, that doesn’t necessarily translate into a stabilizing market.
The builders are making a prudent, long-overdue decision to “stabilize” their bottom lines and try to reduce inventory. OK, fine.
But what the MSM can’t seem to realize is that builders have “sold forward” so badly over the last few years, that nothing short of totally stopping new construction is going to “stabilize” the market, if that.
Question: Were most of the new home sales since 2004 made by “end users” or by flippers in their many disguises, i.e. “second (or third) homes” or “vacation homes” or (now) “don’t-wannabe landlords”?
Even if that ratio was 50/50, that’s a lot of “new” inventory that isn’t in the hands of “end users.” These houses are almost certain to come back on the MLS in some fashion or another, and they will come back as “resales,” including forclosures.
So there’s plenty of “new” or lightly-rented properties out there, regardless if builders put down their hammer and nails for a few months.
The bottom line: builders have “cannibalized” their pool of buyers so badly, I’m not sure a slowdown in permits will make much difference at this point. Just because they pull fewer permits so they can “clear out the existing inventory,” that doesn’t necessarily mean that inventory is going to sell.
What buyers are left? Dead people? Children? Because anyone with a pulse and a wish for the “American Dream” has already bought.
And now that subprime credit is starting to tighten, that’s only going to keep the inventory numbers soaring. Can’t wait until after the Super Bowl to see the spring dead-cat bounce.
– The Judge
“Remember, sell now or be priced in forever.”
Judge-
The line in Hamlet comes to mind:
This use of this statistic always mystifies me. My experience is that people generally have no idea whether they’re capable of spending more money, or in financial danger, especially since Visa has managed to completely rob them of any visual barometer of how much money they have (or don’t). As far as I can tell the only thing that influences consumer confidence is the price of oil/gas. It has nothing to do with reasonable analysis or reality. I also have to laugh at the headlines about rising wages fueling all this spending. I don’t know about you, but my wages are governed by a contract and I don’t know anyone else who is marching in and demanding a raise because they heard their was a labor shortage. Just who is this massive group of Americans with massive rising wages fueling their spending. It’s not the way I live, my parents live, any of my friends live.
If anyone can frame any of this up for me so it makes sense I’d much appreciate it. For now I guess I’ll go back to my non-MSM alternate universe. Smiles all.
You know, too, that the realtors will “revise” their assertions of there being no “housing bubble”.
That will come, of course, in a few years, once the effects of the bubble are past.
“Now that that bubble has passed, the one that we’ve been denying straight-faced as it happened all along, it’s time to buy, buy, buy!”