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New House Sales Show Continued Improvement

ilene's picture




 

New House Sales Show Continued Improvement

From Historically Miserable Level

Courtesy of Lee Adler of the Wall Street Examiner

 

While the media was touting a miss on consensus expectations, and Bloomberg posted an outright lie on Twitter, the actual unadjusted data showed a big improvement over the year ago performance.

That’s not saying much, considering the rock bottom levels this is starting from, but nevertheless, addition is better than subtraction. No matter how small, any increase at all from these levels is a net add for the US economy. Unfortunately, at this rate of improvement, it will be a very long time before most Americans feel any benefit.

Here are the quick facts. Sales were 25,000 in February vs. 22,000 in February 2011. The month to month change was a gain of  approximately 14% vs. 5% in 2011. The media touted a miss of economists’ consensus expectations. What else is new? Economists guesses nicely fit a random distribution. They are worthless and most experienced traders know that.

The bigger problem with the reports was that they indicated that sales were down, which is false. They were using a completely fictional, meaningless, seasonally adjusted number that has no basis in reality. The actual number was up versus January and up versus 2011.

It is important to note that these numbers are based on a small sample survey, have a wide margin of error, and are subject to big revisions in ensuing months. On the other hand, it is rare that a reported gain is subsequently revised to a decline in ensuing months.

The headlines touting a decline are flat out wrong, misleading, and disingenuous. The Commerce Department also reports the actual, not seasonally adjusted numbers. Apparently, mainstream media reporters and editors are too lazy and/or too dishonest to report them. Bloomberg is usually among the worst offenders in this regard. It is unconscionable that the mainstream media continue to report the bogus seasonally adjusted number while completely ignoring the actual number. If they are going to report one of the numbers and not the other, the least they can do is report the actual number and do a little analysis. It’s not that hard. A 6th grader could do it. I should know, given my level of education.

We do have to be careful because this data is based on sales contracts. To that extent, it’s a good barometer of relative demand, but we also know that large numbers of sales are falling through.  The NAR reported a contract failure rate of 31% of existing house sales in February versus 9% last year. I doubt that builder sales blowups are that high. Builders should be far better prepared in terms of having any problems with appraisers, and they are likely to have done a better job of qualifying buyers than Realterrors do. On the whole, I would guess that final sales will be a little better versus last year. It’s not much, but it’s better than media reports are representing.

Additional data shows that the actual inventory to sales ratio was 6.0 in February vs. 8.2 in February 2011. That’s a huge improvement. Did you see that reported anywhere? I didn’t think so.

New House Sales Chart- Click to enlarge

The big jump in the NAHB builder survey was not matched by the increase in sales. Either builder perceptions are distorted, or the Commerce Department missed something. Next month’s data should be enlightening. 

NAHB New House Sales and Traffic vs. Commerce Department - Click to enlarge

Reported contract sale prices jumped in February and they are now up 6.2% versus last February. Median reported sale prices have been making higher lows for 2 years, but they have yet to break out to higher highs versus the peak levels of the past 15 months.  While prices seem to have bottomed, it is not clear yet that they are headed higher. 

New House Sale Price Chart- Click to enlarge

We should note that these minimally improved levels of pricing are happening at a much lower level of supply and sales volume than were considered normal in the past.  There’s potential for pricing leverage on even a small increase in effective demand.

That’s a condition that may be hard to meet, with slow growth in full time employment, and most of that growth in low wage jobs. But just last week I saw an ad from a large Florida builder screaming at buyers to beat the price increase coming in April. It’s been about 5 or 6 years since I have seen one of those, but it suggests that with the low levels of inventory pricing power may be returning to some more active markets where prices have cratered.

I’ll cover that in more detail along with a wide variety of other housing indicators in the next Professional Edition housing report in early April.

 

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© Copyright 2012, The Wall Street Examiner Company Inc. All rights reserved.

Attention third party re-publishers: This article may be reposted only in its entirety with a prominent link to http://wallstreetexaminer.com or other page on this website. Any changes to the article, or other use without the expressed written consent of Lee Adler is unauthorized. 

 

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Sat, 03/24/2012 - 06:41 | 2286249 dogfish
dogfish's picture

liquidateing mostly cheap houses what happens when the more expensive houses come to market.more tripe from ilene(to the left)

Fri, 03/23/2012 - 23:19 | 2285906 One World Mafia
One World Mafia's picture

I talked to a real estate agent last week who told me foreclosures are not dropping but the banks are making 10k to 15k of cosmetic repairs at their own expense rather than drop the price.

Fri, 03/23/2012 - 21:06 | 2285711 AN0NYM0US
AN0NYM0US's picture

The headlines touting a decline are flat out wrong, misleading, and disingenuous.

 

New Home Sales Make It 12 Out Of 14 Economic Misses

http://bit.ly/GKSrab

 

Following last night's post on the destruction of the positive trend in macro data (as expectations once again extrapolated to infinity have missed miserably), New Home Sales made it 12 of 14 this morning as they missed horribly. Against an expectation of a +1.3% gain, new home sales fell 1.6% MoM but what is even more shocking (and surely in retrospect would have caused the market to subside aggressively) is the massive revision of the previous month. From a -0.9% 'modest' fall, January's data was revised to a massive 5.4% drop MoM - the largest drop in 13 months! This is the largest downward revision since March 2009. Perhaps KB Home is not the outlier and the 80% rally in the Homebuilder ETF was a little overdone, eh Bob?

13 month lows in January for the new home sales MoM change and the largest downward 'reality' revision since March 2009...

Fri, 03/23/2012 - 21:05 | 2285708 mumbo_jumbo
mumbo_jumbo's picture

we do all realize that this Feb. was the warmest in like 25 years so most comparisions to a normal Feb. are meaningless.......no?

Fri, 03/23/2012 - 20:47 | 2285683 TheMerryPrankster
TheMerryPrankster's picture

simple demographics and extrapolation of declining income levels for the middle class, make it clear even to a blind man.

Their is no one with sufficient  money in the age group that buys home, that can afford to buy a home.

Ergo prices continue to decline along with new home construction, except for those making over 200k per year. There are more empty homes than there are full wallets to buy them.

 

uhmm maybe that should be fool wallets.

Fri, 03/23/2012 - 20:05 | 2285606 Bicycle Repairman
Bicycle Repairman's picture

Housing will not bottom for a decade or longer.  If you want to watch monthly figures and get in a lather over it, you'll be stark raving insane before the bottom is reached.

Fri, 03/23/2012 - 20:00 | 2285597 Michael..Taylor
Michael..Taylor's picture

I think the whole quote recovery can be summarized as "When your as low as whale shit, there is nowhere to go but up!" It so simple when you compare shit to shit = shit.

Fri, 03/23/2012 - 19:27 | 2285512 bugs_
bugs_'s picture

thanks

Fri, 03/23/2012 - 22:19 | 2285444 Lee Adler- The ...
Lee Adler- The Wall Street Examiner's picture

Look at the actual NSA numbers, not the SA crap. 

http://www.census.gov/construction/nrs/pdf/newressales.pdf

People should read the whole article carefully rather than spouting nonsense criticisms that have nothing to do with the point of the article, which was that the story was grossly misreported, not that housing is recovering.  

The point about the weather is a good one. March data should be telling in that regard. But please ignore the SA numbers. They are crap. 

 

Fri, 03/23/2012 - 18:55 | 2285422 bkrolik
bkrolik's picture

Am i nuts? Bloomberg shows actual 313k, down from revised 318k m/m. So, it is right, right? Oh, I see, Mr. Adler says the number is "completely fictional, adjusted".... But, to my meager knowledge, it's the same as any other ECO statistics. So, why he criticises this one? What about the others? No need to adjust? Or, they shoud be adjusted the other way?

 Then, what about previous month number? Presumably, it should have the same adjustment error? And we still see decrease.... Also, to eliminate seasonal adjustment, we should supposedly look at y/y numbers? And Mr. Adler gives us 25k vs 23k yr/yr, clear growth!!! So, the sales are up y/y, right? Well, does Mr. Adler has any memory of the last year February? Average temperature, maybe? And he thinks it should not be adjusted.... More than that, the recent number is preliminary. Would not it be prudent to wait until the next month for the final number to claim "growth"?

Usually, Mr. Adler research is very good. Unfortunately, i cannot say this about this piece

 

Fri, 03/23/2012 - 18:02 | 2285239 adr
adr's picture

If 30% of contracts are failing then the end sales number will be at least 30% below the reported number, THAT IS WAY BELOW LAST YEAR,

Lies are lies and the entire system is based on lies, The only truth is what you can see when you walk out your door. Outside my door evryone is worried. They are coping their best but nobody is hopefull the economy will turn around. It's like waiting for your turn to be hung.

Fri, 03/23/2012 - 17:48 | 2285176 Randall Cabot
Randall Cabot's picture

An October-like February across the country was only worth a 3000 unit increase? That tells me we won't see much going forward.

Fri, 03/23/2012 - 17:46 | 2285163 Yen Cross
Yen Cross's picture

So Ilene, the so called "analyists expectations" only work when they fit into the GREEN  "arrow up" banksters trading scheme?

 You did catch the revision down to 318k from 321k last month? 

Fri, 03/23/2012 - 17:40 | 2285140 imapopulistnow
imapopulistnow's picture

New home sales are mainly out in the surburbs.  It is the only place where large tracts of developable land are available to build on. $4 gas with uncertainty about future prices will scare away customers IMO. 

Student loans are a rercent phenom.  Each graduating class has a high percentage of indebted grads entering the work force.  They will not be able to amass the down payment needed to buy a home.  Thus the market for starter homes will be seriously crimped for years to come. 

Many millions of potential homeowners are out of the market for up to 7 years due to ruined credit.  They will have no choice but to rent.

Homeownership is no longer looked at as an investment.  Job dynamics speak against locking into a home purchase with its high transactional costs.

Marriage and birth trends are going the wrong way to support housing expansion.

Young professionals desire to live in the city rather than out in traditional suburbs.

We could have a home sales rebound of the dead cat sort, but the long term prospects are not good.

Fri, 03/23/2012 - 17:37 | 2285130 nameless narrator
nameless narrator's picture

jeeesus, this reporter is the biggest TOOL I've seen this year.   wow.

Fri, 03/23/2012 - 20:52 | 2285687 TheMerryPrankster
TheMerryPrankster's picture

It's only march, I'm sure an even bigger tool will be waiting to the fill the shoes and wear the suit.

Tools and fools make the world go round. Me I just like watching the grand parade and try to supress a giggle as they trade pieces of paper for empty dreams.

Fri, 03/23/2012 - 21:11 | 2285719 AN0NYM0US
AN0NYM0US's picture

this reporter is the biggest TOOL I've seen this year.   wow.

 

not a TOOL, just a self destructive blogger (slagging the host and all)

Fri, 03/23/2012 - 17:17 | 2285071 Curt W
Curt W's picture

Today Bank of America announced that they will soon be the largest landlord in history as they start renting all their millions of foreclosed homes.

Fri, 03/23/2012 - 17:10 | 2285056 tony bonn
tony bonn's picture

i would like to see the impact of the shadow inventory on housing supply which i think excludes the bank reposessions and similarly sequestered properties....

Fri, 03/23/2012 - 20:56 | 2285694 TheMerryPrankster
TheMerryPrankster's picture

You know what happens when the real estate ground hog sees his shadow inventory? Six more years of Depression.

Punxatawny Phil got foreclosed on, he's renting a 2nd hand habitrail from a gopher who's pimping his old lady.

Even still Lawrence Yun,NAR economist, says there has never been a better time to buy a wire cage and move in and start a litter.

Fri, 03/23/2012 - 17:05 | 2285042 apberusdisvet
apberusdisvet's picture

Median housing income is $50K and falling.  Median new home price:  $200k+.  Median used home price: $168k.  Under new qualifying metrics, the median h/h can afford, at best, a $125K home.  Sure looks like existing prices need to drop 30% to meet the median affordaboility levels.  Or are we going back to NINJA loans?

Fri, 03/23/2012 - 18:05 | 2285256 skepticCarl
skepticCarl's picture

At 4% for a 30 year fixed mortgage, the average household can pretty much afford the monthly payments on the average home price.  The lack of down payment, and lousy jobs, are what's holding back the next generation of home debtors.

Fri, 03/23/2012 - 16:45 | 2284965 xtop23
xtop23's picture

Manipulated data obviously - Housing has not bottomed yet.

I'm guessing another 6-8% correction to the downside nat'l avg. minimum.

Unless all those new greenbacks, that are supposedly sterilized and not in circulation, find a way into the system.

Then things could start spiking up quickly.

Fri, 03/23/2012 - 16:37 | 2284928 infotechsailor
infotechsailor's picture

Multi-family units.

So if we count duplex and villas rancheros as a recovery, I 'spose that's what it is.

Fri, 03/23/2012 - 16:29 | 2284885 W10321303
W10321303's picture

If the sample and the margin of error are as you say, then the whole report is totally worthless, election year BS...we already knew that.

SOP for an election year. Bush and Co. wouldn't report that the recession had 'officially' started eight months earlier until December(?)

But at least you get to practice your composition.

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