Ah, once again we play dueling numbers with the New Home Sales Report. Reuters reports:
WASHINGTON, Oct 25 (Reuters) - Sales of new single-family U.S. homes rose 4.8 percent in September but sales in August were revised down sharply according to a government report on Thursday that painted a mixed picture of the battered housing sector.
According to the Department of Commerce:
Sales of new one-family houses in September 2007 were at a seasonally adjusted annual rate of 770,000, according toestimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.8 percent (±10.3%)* above the revised August rate of 735,000, but is 23.3 percent (±8.0%) below the September 2006 estimate of 1,004,000.
Note that once more, the margin of error for the month-to-month figure is larger than the percent change, making the number statistically insignificant. As usual, at the bottom of the report, the Commerce Department states:
Changes in seasonally adjusted statistics often show irregular movement. It takes 5 months to establish a trend for new houses sold.
Translation: "Don’t get too worked up about MOM, you need to look at the long term trend." Note that the longer term year-over-year is down 23.3%.
In addition to the margin of error, there’s the matter of the revision. Just for fun, I thought I would try something a little different with the graph. When graphing the sales numbers, I always revise the previous month’s figures. This month, I’ll graph it both ways.
Here is the trend using last month’s unrevised number:
Now here’s what it looks like with the revised August number:
Either way, it’s pretty clear what the trend is.
Median Price
The median price for new homes in September was $238,000. This is up 2.5% from August’s $232,100, and up 5% year-over-year. The median however, has been greatly impacted by tightening in the credit markets and massive incentives offered by homebuilders. Based on reports by builders of price cuts, and very little being reported in the way of increases, it appears the increase in the median is more a reflection of the mix of homes sold than appreciation in the new home market.
Inventory
From Bloomberg:
The number of homes for sale at the end of September fell 1.5 percent to 523,000, the fewest since January 2006. At the current sales pace, that brings the inventory of unsold homes down to 8.3 months.
“Looking at the listings of new homes suggests that the inventory is still way too high and that we’ll see even greater discounting in order to clear the market,” Avery Shenfeld, senior economist at CIBC World Markets in Toronto, said before the report.
Throwing in an R-squared, nice! Do you see this as a predictive straight line for the next few months?.
Again, the lazy MSM were just parroting the party line from NAR on this.
Metro-
I think the trend will probably be pretty consistent for the next few months, but I would think things would moderate a bit in February. The MOM is too variable [and too subject to revision] to get worked up about any one month one way or the other.
The Commerce Department does a better job than most of clearly stating in their report that the trend is only good over months, margin of error, etc.- but too many folks don’t have the attention span to get past the headline.
But what about the March 2008 ARM resets? I predict his line will go straight through 2008. Just MHO. Again I am just thinking trend-lines.
The only reason sales are “up” MoM in September is because August was “revised down sharply.” Although I don’t have the documentation, the trend seems that every month over the past year has been revised down from the initial overly optimistic reports. Yet, they rarely get called on the revisions by the time the next month’s reports are released.
No doubt we’ll see September’s figures revised downward as well.