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New Home Sales Highest Since April 2010... Until One Reads The Fine Print

Tyler Durden's picture


On the surface, today's New Home Sales number was great (as always tends to happen just before a presidential election): a print of 389K seasonally adjusted annualized units sold in the US (ignoring the 37.3% collapse in the Midwest), which was a 5.7% increase from August's downward (unlike initial jobless claims, when one is attempting to report an increase, the last number is always revised downward) revised 368K (was 373K). This number was the highest adjusted print since April 2010, which makes for great headlines. So far so good, until one looks beneath the headline and finds that the 389K number (to be revised lower next month), is based on a September unadjusted number of 31K in actual sales, consistting of 3K sales in the Northeast and MidWest each, 16K in the South and 9K in the West. This is the unadjusted number, which as last week's BLS fiasco with Initial Claims showed, applying seasonal adjustments is the easiest and best way to manipulate any data set (for more see X-12 Arima's FAQ - all 257 pages of it). This was the lowest print since February's 30K, the same as August's 31K, and well below the 35K from May 2012.

But wait, there's more: when one looks at the stage of construction (analogues to Housing Starts and Permits where one just needs a piece of paper to fabricate buying interest, and can be cancelled days later with zero sunk costs), the 31K unadjusted number consisted of 10K Not Started, 10K Under Construction, and 11K homes actually completed. To summarize: the Census Bureau took the sale of 11K actual new completed homes and extrapolated an annualized, seasonally adjusted number of 389K, feeding the media a number that is the "highest since April 2010." Instead, one look at the NSA chart below and one can see that grinding along the bottom is the best one can actually say.


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Wed, 10/24/2012 - 10:27 | 2915657 Gene Parmesan
Gene Parmesan's picture

At any cost...

Wed, 10/24/2012 - 10:29 | 2915664 Oracle of Kypseli
Oracle of Kypseli's picture

Best reason to check ZH before acting

Wed, 10/24/2012 - 10:41 | 2915694 redpill
redpill's picture

The sample size on that survey is so thin it's nearly meaningless anyway.


Regardless, Fed money is making it to the housing market, and the relatively few remaining home builders that have survived this long are building to market conditions.  They've been able to hold the line on price.  But there are substantial constraints on growth, and anyone that thinks homebuilder stocks are a lucrative opportunity is fooling themselves.  The construction industry segment is thoroughly analyzed and front run by hedgies anyway.

Wed, 10/24/2012 - 10:55 | 2915728 mvsjcl
mvsjcl's picture

"...and the relatively few remaining home builders that have survived this long..." are owned by who?

Wed, 10/24/2012 - 11:00 | 2915740 redpill
redpill's picture

The largest ones are publicly traded, so you can look up their top share holders if you like.  Of course they lobby the shit out of the government too so you can expect to see continued attempts to reinflate the housing bubble.

Wed, 10/24/2012 - 11:16 | 2915775 otto skorzeny
otto skorzeny's picture

the only people building/buying around here (Chi burbs) are cops/firefighters/govt leeches that have their "jobs for life"(or until their pensions are Corzined

Wed, 10/24/2012 - 11:34 | 2915832 MiltonFriedmans...
MiltonFriedmansNightmare's picture

I feel ya Otto. In Northwest IN, I know of at lest 3 housing starts (I'm confident there are at least one or two more that I'm unaware of).

Wed, 10/24/2012 - 12:15 | 2915933 alangreedspank
alangreedspank's picture

lol @ "Corzined". You can expect firefighters setting fires and cops creating chaos when that happens.

Wed, 10/24/2012 - 12:18 | 2915941 alangreedspank
Wed, 10/24/2012 - 11:05 | 2915741 malikai
malikai's picture

Want to make your head explode? Calculate your home's value in barrels of oil for 1999, 2002, 2007, and today.

Wed, 10/24/2012 - 11:16 | 2915766 socalbeach
socalbeach's picture

Housing priced in gold for last 36 years as of last Nov when gold was $1,785/oz.

Wed, 10/24/2012 - 11:22 | 2915793 malikai
malikai's picture

Gold is really a good one. I like oil because it displays purchasing power in energy, which is familiar to all americans.

Wed, 10/24/2012 - 11:47 | 2915813 TruthInSunshine
TruthInSunshine's picture

I know this industry well. This is an abysmal annual rate of sales even on a seasonally adjusted basis.

Remember that the annual rate of NEW HOME sales was 2.1 million units in 2006.

We are talking depression levels housing sales with these latest datum, so I can't fathom how any entity or person can trumpet this level of sales as anything that's remotely indicative of strength, let alone not indicative of extremely anemic.

Once one factors in the multi-unit residential sales, many of which are the result of subsidies from government agencies, both to builders and buyers, and then considering the rampant levels of mortgage fraud (...surprise!, It's back) not only in the new home market, but also in the existing home market (see "flopping" as an example), which has an impact on the new home sales' levels, this is an abomination.

FHA loans only require 3.5% down, and mortgage rates are at historic lows, and these are the best numbers new housing sales can post? AWFUL, and very revealing about how epicly bad the actual economy truly is.

Consider also that the best season for new home sales (i.e. the actual transfer of the deed to owner or mortgage lender) is the period just prior to the start of school in late August through October (some people miss the back to school deadline by a few weeks or a month inevitably), and these sales' numbers are simply incredibly bad.

The most worrying aspects to these latest datum is that housing is now being talked about again as "taking the baton" from manufacturing as a core industry to lead U.S. GDP growth, when anyone who understands economics 101 knows definitively that housing is not an industry that should be viewed this way, given that its health depends on the true rate of growth in employment and wages elsewhere, and any attempt to portray the housing industry as anything other than dependant upon and derivative of the real health of the real, core economy, is absolute lunacy.

The housing bubble became a bubble because unit sales of new homes and their prices were rising despite the fact that jobs and wages in other key areas of the economy were being gutted, and a cycle then ensued that hid that destruction whereby people who lost jobs or suffered reduced income in non-housing sectors of the economy shifted into the housing sector, thus depending on ever increasing sales and prices in new homes to maintain their employment and income.

The housing market (especially new housing) is a derivative and NOT A DRIVING CAUSE of the true health and growth of the economy.  A prime case study of this is the Spanish housing bubble, which was epic, and which provides clarity as to how housing is never a sustainable driver of economic growth (if the economic growth isn't happening in sustainable portions of the economy, housing will collapse).

These equal depression level new home sales even if the highly massaged and manipulated headline number is assumed to be accurate (which, of course, it's not).

Wed, 10/24/2012 - 12:21 | 2915947 alangreedspank
alangreedspank's picture

Good post.

Wed, 10/24/2012 - 12:34 | 2915975 malikai
malikai's picture

Lol! Feed The Fed?

To the lions..

Wed, 10/24/2012 - 13:07 | 2916056 Kaiser Sousa
Kaiser Sousa's picture

thanks for that sunshine...

ur post will be  exhibit A when i confront the muppets at my local pub later today...

to no avail of course...they're still plugged n.....

Wed, 10/24/2012 - 13:47 | 2916171 walküre
walküre's picture

Good post. What is the current inventory to sales ratio? That's gotta be one ugly number.

Wed, 10/24/2012 - 16:24 | 2916672 Smiddywesson
Smiddywesson's picture

The housing market (especially new housing) is a derivative and NOT A DRIVING CAUSE of the true health and growth of the economy. 

No, we have Facebook and iPhones for that...

Wed, 10/24/2012 - 13:15 | 2916084 Panafrican Funk...
Panafrican Funktron Robot's picture

Total unadjusted sold through 2012:  285K

Total unadjusted sold through the same period of 2011:  234K

Annual sold 2009:  375K

Annual sold 2010:  323K

Annual sold 2011:  306K

We'll probably hit a sales number similar to 2009.  However:

Annual sold 2005:  1,285K

Annual sold 1982 (when a 30 year mortgage had an 18% interest rate):  412K



Wed, 10/24/2012 - 15:31 | 2916518 JuliaS
JuliaS's picture

They should model the housing survey after the BLS model to determine whether a person qualifies as a homeowner:

- Have you visited a house in the last 4 weeks or any structure containing either a roof or a wall?

- In the last 4 weeks, have you held a key, a keycard, a crowbar or any other device capable of opening doors?

- Are you planning to visit any structure located under or above ground in the next 4 weeks?

- Are you responding to this survey indoors right now?

If you answered "yes" to any of these questions you are a homeowner.

Wed, 10/24/2012 - 11:00 | 2915735 midtowng
midtowng's picture

If you take into account seasonal adjustments, I'm a 10 with women.

Wed, 10/24/2012 - 10:31 | 2915661 Insideher Trading
Insideher Trading's picture

People who live in 76 - 100 sq ft homes:

Wed, 10/24/2012 - 10:31 | 2915662 Jlmadyson
Jlmadyson's picture

31K what a joke.

Even worse with the fine print.

Wed, 10/24/2012 - 10:30 | 2915665 ebworthen
ebworthen's picture

Extrapolation, the new normal!

Shadow inventory?  There is no shadow inventory, all been bought up by cash rich investors!

Problem?  What problem?  That isn't a 2-inch wart on my face, it's a second nose that acts as gills under water, really!

Wed, 10/24/2012 - 10:49 | 2915714 JPM Hater001
JPM Hater001's picture

I want to try this extrapolation thing.

Does it come with a manual?

Wed, 10/24/2012 - 10:32 | 2915670 mayhem
mayhem's picture

bullshit bullshit bullshit bullshit... that is what is fed to people everyday. But it is in print so it must be true. 

Wed, 10/24/2012 - 11:06 | 2915736 Eternal Complainer
Eternal Complainer's picture

Of course they roll out Buffet this morning on CNBS( with trophy girlfriend)
to add credence by confirming the bullshit before hand first with Buffet claiming the rebound in housing.
It's like watching The Sting, with Redford and Newman, but instead it's Buffet and CNBS harlot.


Wed, 10/24/2012 - 11:19 | 2915782 otto skorzeny
otto skorzeny's picture

Becky Quick (followed by Maria B) needs a good donkey punch

Wed, 10/24/2012 - 12:34 | 2915977 malikai
malikai's picture

I'll take care of Becky, you get Maria.

Wed, 10/24/2012 - 10:31 | 2915671 rajc
rajc's picture

soon the street will become smart....wait for it...wait for it...

Wed, 10/24/2012 - 10:32 | 2915672 ziggy59
ziggy59's picture

Its the mathematicians that should get the best drug trip award. Because, DAMM!!

They take hallucinating to the next level..

Wed, 10/24/2012 - 10:32 | 2915676 Vincent Vega
Vincent Vega's picture

Also reported this morning: MBA Mortgage Apps -12%  (week ended Oct 19)

Wed, 10/24/2012 - 10:48 | 2915713 ebworthen
ebworthen's picture

Shhhh!  Hopium day today, reality can wait.

Wed, 10/24/2012 - 10:50 | 2915717 JPM Hater001
JPM Hater001's picture

Transitory.  Had to be a holiday in there somewhere that caused this...or warm weather.

Wed, 10/24/2012 - 10:35 | 2915680 fonzannoon
fonzannoon's picture

Santelli used to jump on this info but he has gone spineless lately. now he just tips his hat to the positive data. then they cut to kaminsky who gets concerned that the fed will have to start undoing qe based on these positive datapoints. they must have to get to work at 3am to rehearse this farce.

Wed, 10/24/2012 - 10:44 | 2915703 ebworthen
ebworthen's picture

In this economy, Rick probably wants to keep his job.

CNBC producers can only allow so much reality to leak out.

Wed, 10/24/2012 - 10:54 | 2915722 LouisDega
LouisDega's picture

Hes putting on his Howard Beale costume as we speak


Wed, 10/24/2012 - 10:38 | 2915687 DOT
DOT's picture

Don't waste those lies!


Every lie is sacred,

Every lie is pure,

If a lie is wasted,

Barak gets quite peturbed.

Wed, 10/24/2012 - 10:39 | 2915688 insanelysane
insanelysane's picture

Seems bullish to me.  11k new homes completed in September.  That is 220 per state and in Massachusetts that translates to just under 1 new house per town. Bullish I say! </sarc>

Wed, 10/24/2012 - 10:52 | 2915724 Village Smithy
Village Smithy's picture

Sometimes the simplist math can say so much. Nicely put.

Wed, 10/24/2012 - 11:03 | 2915745 mvsjcl
mvsjcl's picture

But that will surely skew Wyoming and Alaska numbers!

Wed, 10/24/2012 - 10:40 | 2915691 PUD
PUD's picture

Did they sell or did they not? WTF seasonal adjustment is there? Was the contract signed or not? jesus christ...hope the Donald lowers the boom today. lol

Wed, 10/24/2012 - 10:41 | 2915693 Doubleguns
Doubleguns's picture

I wish I could extrapolate an annualized, seasonally adjusted paycheck number. THAT would get my animal spirits going.

Wed, 10/24/2012 - 10:41 | 2915696 slackrabbit
slackrabbit's picture

“New Home Sales Highest Since April 2010 (in a parallel universe)

Wed, 10/24/2012 - 10:42 | 2915697 Dr. Engali
Dr. Engali's picture

Since we are back with a booming housing market uncle Ben can start withdrawing some liquidity right? He might need to put on the brakes before this thing over heats.

Wed, 10/24/2012 - 10:42 | 2915698 you enjoy myself
you enjoy myself's picture

all of this seasonally adjusted nonsense, across all reports, should be ended immediately.  its the government's job to just report the hard numbers - leave the extrapolations and interpretations and estimations to the army of priavte sector analysts to do what they like with it.   we're employing all of these bureaucrat PHD's to massage numbers for absolutely no reason.  the report should have been generated by one person in one day of work, and consisted of nothing but "10K Not Started, 10K Under Construction, and 11K finished homes", with a state by state listing.  the end.

Wed, 10/24/2012 - 11:16 | 2915774 Rainman
Rainman's picture

You want .gov to discontinue confusing the sheep..?? That's never been attempted ever.

Wed, 10/24/2012 - 10:43 | 2915700 Cursive
Cursive's picture

11k new homes = 389 new home sales  WTF!!!!!!!!!!!!!!!!!!!!!!!!!!

One hope that I have for The Great Reset is that we can get back to reality and truth.  Maybe a hopeless cause, but worth striving for, nonetheless.

Wed, 10/24/2012 - 10:43 | 2915701 NooooB
NooooB's picture

300,000 sure sounds a lot better than 25,000 ... People that do this kind of shit should be hung. They know what they are doing. Obfuscation should be constitutionally outlawed under penalty of death.

Wed, 10/24/2012 - 10:49 | 2915718 ebworthen
ebworthen's picture

What's a "constitution"?

Wed, 10/24/2012 - 13:01 | 2916042 viahj
viahj's picture

apparently it's a barbarous relic, but certainly not a tradition

Wed, 10/24/2012 - 10:45 | 2915706 apberusdisvet
apberusdisvet's picture

According to my friends in the mortgage departments of BofA, Wells and Chase, the true mortgage app approval rate is less than 10%.  The real bottom line is that lenders don't really want to lend and the universe of truly qualified borrowers is small, and diminishing.

Wed, 10/24/2012 - 11:37 | 2915844 pursueliberty
pursueliberty's picture

My wife is a realtor and I would say locally the number is much greater than that, but not fantastic.  She has a bank she recommends that is excellent at getting peoples credit fixed up and then getting the qualified for 100% loans through the USDA RD program.  Three years ago these loans didn't exist in my area due to the population requirements.  Now, I'd say they make up a solid 80% of the sub $125k owner occupied home sales.  I think she has sold five or six to buyers using USDA loans this year, the most expensive being a $160k home.  It has caused a extreme rise in homes that were $30-40k less than 4 years ago, but that has also caused rents to rise rapidly behind it.

I know she has very few people who cannot get financing, even though sometimes it might take 90 days to get things worked out or get the score up 20 points.  Our real estate market is strong with inventory at pretty much a low point, and off as much as 50% from 10 years ago.  Nice move in ready homes sell in less than 30 days at prices I'd never consider paying.  I'm continually amazed by the strength of our market and the steady 3-5% yoy rise in prices that have taken place for the last 5 years. 

Being that it is all localized I should mention this is in Arkansas.

Wed, 10/24/2012 - 10:48 | 2915711 takinthehighway
takinthehighway's picture

Lies, damn lies, and statistics...

Wed, 10/24/2012 - 10:49 | 2915719 SheepDog-One
SheepDog-One's picture

Again 'for the presidential election' data same as every other number for at least the last after that puppet show is over in a couple weeks I guess all the gates of hell will open wide.

Wed, 10/24/2012 - 11:02 | 2915742 Seasmoke
Seasmoke's picture

Is this counting the Brazil models purchases ?

Wed, 10/24/2012 - 11:05 | 2915751 kito
kito's picture

Tyler why does the seemingly same chart below the one indicating 31k un sales show 100k??

Wed, 10/24/2012 - 11:10 | 2915763 wagthetails
wagthetails's picture

It isn't that bad of a lie, seriously, yes, still a lie but not that bad.  even unadjusted sales of 31k is equal to a 372 annualized rate.  The chart tells it all.  Looks like we have flat lined at about 20-25k units/month or about 240-300k annualized, obviously they are giving more weight to the last few months.  Really, i just eye ball the actuall TTM number and then the trailing 3 months actual number compared to prior year trailing three months number. 

if this was the only economic metric i followed, i'd say housing has bottomed, with a slight improvement over prior years.  of course as well all know inventory, actual and shadow, has put a ceiling on any further meaningful building growth, AND this market has been rigged by the gov, and it seems the positive effect of any further QE or stimulus is running I expect another leg down eventually.  But best case, we see the past 12 month trend continue...essentially a flatline.  which considering the state of the world, might actually be cause for cheers!

Wed, 10/24/2012 - 11:19 | 2915779 GolfHatesMe
GolfHatesMe's picture

We now apparently have 12.54 month in the year

Wed, 10/24/2012 - 11:23 | 2915799 Bold Eagle
Bold Eagle's picture

In other news: "ADP is altering the formula used for counting how many U.S. jobs are created each month in order to better align with government data..." Any doubts that ADP report that will come out on Nov 1st will look great? It's getting scary.

Wed, 10/24/2012 - 11:25 | 2915802 orangegeek
orangegeek's picture

The "new normal" is blatant misrepresentation from banks and government.  This is what can be expected in this bear market that started in 2007.


So why is the lying picking up momentum?  Take a look at a weekly chart - add to it the drop this week.


And there's more drop to come.

Wed, 10/24/2012 - 11:31 | 2915822 adr
adr's picture

At least the actual jobs number is sometimes higher than the seasonally adjusted number. The seasonal adjustment to housing seems to have always at least doubled the actual number.

Out of the 11k homes actually completed, how many were actually sold? 2000, 500?

I brought the actual fact of true homesales up to my mother's friend who works as a realtor. She claimed that over 300k homes were being sold every month and housing was on its way up again. When I told her that the numbers she uses at work are all adjusted fabrications, she looked at me with a devil's stare.

I pulled up an unadjusted sales chart and showed her that less than 20k homes were actually sold nationwide in the month she claimed over 300k were sold. I said this is actual data based on finalized contracts. Do you get paid commission on the application of a mortgage, or the closing paperwork from the title company? I did say I would be mad though since her sales should be based on adjusted numbers, if her office played by Wall Street rules. If she sold 5 houses in a month, based on housing statistics, she should get credit for 500.

Wed, 10/24/2012 - 12:22 | 2915952 GrinandBearit
GrinandBearit's picture

Remember that 70's toy... "Sit and Spin"?  Man that was fun.

Wed, 10/24/2012 - 12:46 | 2916006 lindaamick
lindaamick's picture

I guess those sales include the recent Private Equity "in mass" home sales going on in Phoenix, Tampa and Atlanta. 

In Tampa Blackrock bought $1B. worth of homes. 

This should improve the numbers eventually.

The Rentier class is going after hard assets.  Eventually they will own them all if the masses don't revolt. 

Wed, 10/24/2012 - 15:50 | 2916578 Sigep0612
Sigep0612's picture

Way to complicated.  Call a realtor.  Ask him/her how many home they sold in the past 30 days.  Ask how many they sold in September and in August.  Call a Banker.  Ask him/her how many refinances they did in the past 30 days.  How many in Sept and how many in Aug.  

You will find that Volume is declining rapidly.  Everyone who could qualify for a refinance has already done so.   Employment is not accelerating.  Pew Research reports that 21% of young adults 24-35 have moved back home with their parents. No new "family units" are being created.  

So the option is for Bernake to print more money and try to deflate the dollar so we can payoff some of our debt with cheaper dollars OR  pull the plug ...let bondholders take a major hit.  It's going to stink to high heaven for 6-12 months but we'll come back.   The longer we wait to pull the plug, the harder the cement is going to feel when we fall face first.              

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