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Seven Consecutive Downward Reivisions To New Home Sales Data Place Serious Doubts On Report Accuracy
You will pardon us if we don't "buy" the latest attempt by the Census Department to telegraph housing euphoria with the just reported number of 481K new December home sales, a surge of 11.6% compared to November, an increase which was expected by the consensus to be only 2.7%. In fact, the 481K print is now the "highest" since June of 2008.
The reason for our disbelief? Because as we have been tracking for the past 6, and now 7 months, every single such euphoric print since May of 2014 has been revised substantially lower after the fact (and after the headline-scanning algos promptly gobbled up stocks on the initial "beat"), and sure enough, the November print of 438K, was also just "revised" downward to 431K.
Putting today's "highest in 7 years" new home sales print in context: consider that in May 2014 the same data series was originally reported at 504K... only to be revised to 458K!
In other words, there has now been 7 consecutive downward revision to the New Home Sales data!
As we said: forgive us, but we will once again refrain from drinking the Department of Truth's cool aid.
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Precious.
We Making guesses on the new revised number? Current 481, I think we will be 397.
Thsi is truely amazing, given that my black lab could qualify for one of these new home loans with nothing down and no job.
If it is so, then please make yourself useful and explain to this old european that is not used to this arcane and foreign statistic on that quintessential Anglo-American obsession of housing... in simple terms... why "this is truly amazing". then I'm truly at loss, here
I think he was using irony.
nope, I am not, believe me or not. there seems to be a widespread assumption that every and each personal and individual knowledge level is somehow evenly spread
here there are a lot of specialists in one field that somehow assume that they are equally equipped to have a sensible opinion on... well, simply everything
US Housing? the very first time I was even remotely interested in US Housing was when the various CDOs were blowing up, and the "subprime" went awry
in the most Socratic way I know that I know nearly nothing about it
And in the most Socratic way, we know 'they' know nearly nothing about it as well. The difference is they believe they know.
It is ultimately always a confidence game, in this case self confidence. It ain't a lie if I believe it the truth.
Since they are tossing out mortgages like Halloween candy, and New Home Sales are still falling -- I think this paints a much more accurate picture of the underlying economy than consumer confidence.
If things "were awesome" then this metric would be going up as more people could afford a home. This however is not only not the case but completely backwards as many people aren't purchasing even though my dog could qualify for a home loan.
Haus, but why "should" the sales go up? (Again, I'm the utter ignoramus, here, but it reminds me the argument that "indebtness" aka "new loans" has to go up, in the EZ)
why would it be a "good" thing if sales go up? seriously, honest question
Housing markets in the US are gamed at several different levels. This makes them carry much more weight than just simple supply and demand of houses.
1) US mortgages are largely owned by banks, so they represent an asset on the bank balance sheet.
2) Their values are held high by an appraisal system that is apparently a bank-sponsored racket (others more informed please chime in with specifics if you're out there)
3) The finance industry uses houses as something to gamble on (mortgage-backed securities)
4) the finance industry uses housing prices as an indicator to speculate with, so that the price of housing informs various trades and decisions (algos too, I guess) based on where the market appears to be heading
5) The public in the US is propagandized to believe things about the real estate market, like it will always go up (not sure if that survived the 2008 fiasco). Their perceptions are heavily managed on these things through financial group think emanating from wall st. and elsewhere.
The central conundrum in Real Estate pricing in my opinion is this: that the price of house does not represent what a person can pay, it represents what a person can pay with help from a bank. That last part ends up radically altering the way things are priced.
You just forgot to add to #1:
Because of that, many foreclosed properties are kept off the market to not depress prices further (but valued on bank's balance sheets at least at par),
and if the foreclosed house's value is underwater, they are double kept off the market, as every sale would force the bank to realize losses on the mortgage.
Ghord - I've been in residential finance for about 25 years.
New home sales rising is:
1. a barometer of household confidence - households taking on risk to move up/down in the economy. New homes leads to a new mortgage (generally) means that household family has confidence in their jobs & future
2. reflects a potential multiplier to local economy / GDP as it relates to consumer durables (washer/dryers, refrigerators, etc..)
3. new home sale activity levels also good for local economy and ultimately, local jobs, Land developers, engineers before the lots are ready to build the home structure. then plumbers, electrical, etc... Now - many of those workers are illegals but the construction spend generally stays in the local economy
4. new home sales tend to lift the value of existing housing stock in the nearby community (subject to comparables, etc...)
5. new homes sales accelerate the home sale/purchase ladder: in "theory" a new home sale has opened up another housing unit somewhere which then gets sold (eventually). Most new home sales are a move-up in value which eventually opens up housing to new entrants to housing or 1st time buyers (which has sucked for the past 6 years).
New home sales declining or less than expectations works in reverse to my comments above -
NoVa
Our ole european friend I will take a stab at it. Unlike Europeans where most of you rent, the people in America have bought into the so-called "American Dream". In the USA you have not achieved total success until you own a home. Of course they never tell us, you truly never own it even when it is paid for. You will pay taxes on it until you die. Our state government will confiscate your bought and paid for home if you cannot pay taxes on it.
A home is a liability in my mind. You have to pay taxes, upkeep, rountine and major maintenance on it. If your in one of those homeowners associations your doomed to pay dues for the rest of your life as well and they are worse then the government at times. I tell my friends to avoid these subdivisions at all costs. Housing plays a huge part in the USA GDP figures. You see Ghordius homeowners can use their home's equity for loans like a revolving credit card. The can pile on the debt because the home is collateral. It just boggles my mind they are paying a mortgage and then take out a equity loan with 7% interest and pay that as well on equity they already have in their home!!!!
Part of the problem in the USA was the banks making laons to people that basically could not afford a home because the Fed told them taxpayers would have their backs and the other reason is people just piled on debt against their homes and lost a job or had so much debt from equity loans, credit cards, and vehicles they walked away. You see Ghordius alot of people and I imagine this applies to some Europeans as well want to appear successful or they are envious of their neighbors. We call it keeping up with the Jones even when they are broke.
Every driving age child will have a vehicle and phone not to mention what is inside the home. The parents must have a vehicle each. What a crock. I am an ole codger and could care less what people think about me. But appearances is where it is at these days here in the good ole USA. I hope this helps Ghordius!
+1 thanks, GCT
in this context, why is the revision/report accuracy so important? is there politics involved, of the Rep vs Dem kind?
In the US, greater new home sales imply an increase in economic activity. The argument is it indicates a broader rebound affecting construction companies, materials companies, loans, etc. but also indicates that buyers are regaining confidence in their jobs and the 'Merican dream. They'll buy the house, then spend money furnishing it and filling the bedrooms with babies.
From a political perspective, improved numbers back up what the govt, read our great naked emperor and his Keynesian supporters, have touted as 'solutions'. BHO has recently taken to the road doing the only thing he knows--spread propaganda that his economic actions have turned the economy and we are on the road upward. Any data he gets appears in his speeches, like higher car sales numbers (and now he'll include 'improved' new homes sales). He ignores the influence fleet sales, subprime loans, reductions in down payment requirements, etc.
From my perspective, the revision indicates that the reporting system is illegitimate and only provides fodder for propaganda. I believe this is a point of contention among many news junkies. Lefty, democrat news junkies reference report data to tout an Obama-led economic rebound. The right argues that the rebound is bogus and continuing revisions indicate as much, to which the left behaves incredulously and states the right are just a bunch of racist haters. However, I do not believe the issue of report integrity has any presence in the MSM.
But it all just creates noise and prevents any genuine action. That's why neither side escalates criticism. The left and right both welcome distractions that keep attention from the real problems they've both created and won't be able to address (like a couple hundred trillion in unfunded liabilities). If housing demand (and therefore values) drops, an entire pension and education infrastructure will suffer serious declines in funding. The USG provides pension insurance to municipalities that depend on property taxes (and high property values). Neither the USG nor municipal govts want system failure because they don't want to revoke long-promised benefits from all the whiny and potentially violent govt employees.
True writeup.
Americans have watched banksters repothicate money out of thin air and strive to do the same thing by turning their house into a partial repothication vehicle. Even though for the pesky reality of paying it back......
There's nothing wrong with home ownership, it's not for everyone, but it does suit many people.
The problem is that this American home ownership has little to do with Americans choosing to buy. It's all about giving access to 'equity' loans. Without the house, you can't get the equity loan. You MUST get the equity loan, because the American economy NEEDS you to spend money. You aren't getting that money from wages, and your credit cards are maxxed-out, so all that's left is home equity loans. So, TPTB MUST find some way to get you into that house.
Take advantage of the low rates if you really want to buy. But do NOT take out any equity loans!
And keep in mind that they will NOT stop trying to get you to spend money you don't have...prepare for some very desperate moves in the months to come, moves to get spending money into your hands somehow, anyhow...then take that money and SAVE it, or buy PM's. Pay down existing debt...Do anything with that money except go retail shopping!
If they want to turn on the cash spigot, fine. Just be sure the flow only goes one way...into YOUR wallet. Don't give any of it back. Starve that beast!
"you truly never own it even when it is paid for"
yup! my "paid for" ~$1/2m suburban atlanta house costs me ~$7k/yr among taxes, insurance & hoa... & speaking of hoa - our hood has two artificial lakes w/one dam needing replacement but being so old nobody even knows for sure who built it (legend is was wpa/depression) & we've heard #s from $200k-$1m (range largely due to no plans/soil study) which will eventually make for a nice assessment...
not that I'm complaining - we made a conscious decision in the late 90s to agressively pay mortgage down believing the bubble was the bubble it turned out to be & a guaranteed 6% (interest avoidance) beat gambling. problem we have now is what to do w/surplus cashflow? we've had no debt for over a decade but given most asset classes are still overvalued (proped up by electronic printing) what do you do w/it? I actually paid cash for a convertible lexus couple yrs ago, not b/c I saw it as an investment (obviously) but b/c I knew once I took delivery goldman couldn't steal it & treasury/fed couldn't print it into toiletpaper...
Renters pay more and more every year. In 30 years when a house is paid off, renters will still be paying rent at likely more than double the starting rate. The cost of paying rent over a lifetime far exceeds the cost of paying a mortgage even with the continued insurance and taxes. Plus you have an asset you can sell or rent out at those double prices.
The fact that people buy homes when they can't make the payment, or borrow more of their equity is a completely different animal and doesn't belong in the conversation when comparing renting vs. owning.
"In 30 years when a house is paid off... " it's nevertheless still quite a big and long lasting financial commitment, isn't it?
Well Ghordo, you have a shrinking population, and your government stacks and packss you into compact spaces made of concrete and rebar that will outlast your civilisation. You don't need any new housing. You're dying off.
well, yes, we have a shrinking population, at least in theory. but I don't know where you have this "your government stacks and packs you..."
anyway, thanks to all repliers
Don't think your black lab would qualify - The blond lab would be a totally different result.
My only question is does the HOAs cover the police force required to keep the zombies from my high rise?
Sure.
Now....let's talk about a special tax assessment.
"We don't actually know how many houses were sold last month, but since we get paid to do this, here's our guess."
pods
obbumer wants to send a colony to mars but cant get an accurate number on how many homes were sold...hmmm
For $1.00, I'll take 440.
Seven Consecutive Downward Reivisions
There's that number 7 again......starting to get a lil freaked out over here.
Don't be bro. Everyone knows three is the magic number.
Everything else is just wanna be.
42.
7 minute abs!
'7 little chipmunks twirling on a branch, eating lots of sunflowers on my Uncles ranch'
It goes down sweet, but sits bitter in the stomach...
I'm really starting to think some things are manipulated around here.
I was so worried I might be the only one thinking that.
I was never under the impression that the government would actually be trying to put out facts because they have a vested interest in keeping us ignorant.
I just reread what I wrote. How the flying fuck can humans survive as a species acting like this?
Don't tell me, I already know the answer to that.
pods
Dow down 300, gold and silver spiking, dollar tumbling. Truth is showering down this Tuesday.
History truth is a set of lies agreed upon.
"Americans are a dead people that history is about to run over."
Paul Craig Roberts
Now ain't that the truth. :-)
Nodebt and bnub, You two forgot the /s tag. Folks are gonna think y'all are slow.
If you keep revising the past downward after the fact, then future numbers can always look higher. If you didn't learn that from the global warming shysters, here's another opportunity for you.
They're using Michael Mann to hide the decline
I dont believe the revisions are accurate. Less than they show.
you wanted your government - you can keep your government
You mean you can't trust the data!? Shocking, truly shocking...
Hey DR Horton now sells the Horton Express shit box starting at $133,000 here in Central Florida.
This one, though probably revised lower, is probably higher than last month. Epically low interest rates and Fan and Fred now lowering downpayments to 3%.... Not surprising.
Uh, Mr. Author... welcome to 2009. I mean, wait, it's 2015? Sheesh where have you been? They've been lying for decades PRIOR to 2008 :)
I havent looked yet because frankly i hate clicking any .gov link for data, but what is the past 3 years of new home sales in the month of December?
I hate to think what the Department of Peace is cooking up.
Just watch the main stream media for the recurring face of a foreign leader who is painted as all bad.
Then change investments to coincide with the war with that country.
This report doesn't mean as much anymore. In my neighborhood which was built in the late 60s through early 80s and some in the 90s, it's all tear downs and rebuilds or remodel jobs. Younger couples are moving into the houses that the octogenarians died in and have now been either torn down or revamped.
Young couples I know put most of their savings into remodeling. It's a fancy thing to do and makes great dinner party conversation.
Americans are addicted to owning land. Even though it could be the worst time to ever invest they would still be willing to buy at any price if the banks loan them the capital. People find safety and comfort in the thought of a nest that is theirs and nobody elses like a bunch of hurt children.
I've only ever rented and I have never signed a lease. I'll take my freedom over being locked down in a contract any day.
And I am not against someone owning land if they produce a good, like work from home/farm etc. But when someone signs their life away to a bank for a future promise to own land they are taxed on for rediculous amounts of interest I laugh.
In the feudal model, the peasants didn't own the land they worked, could be conscripted for military service. Taxes were paid in goods and services to the lord, the rest would be for sale to their own advantage. In exchange for these taxes and duties, the peasants were provided with a place to live, land to work, a set job for life, food, security, clothing, healthcare and other nice things... afterall, it would be kinda stupid for a lord to piss off the peasants who outnumber him, which would at the very least jeopardize his obligations to the higher powers.
In the current system... you work for whoever, whereever and they have the right to just fire you. With the employment situation as it is, you have zero bargaining power most likely, you will be paid as little as it takes to keep you from leaving. Housing, healthcare, etc.. that's all up to you to come up with. You pay taxes at all levels, to the city, state and feds. Your land is not yours, failure to pay taxes means you lose it, and those taxes are not set based on any measure of production, but rather on perceived value and worth... and if you are forced to sell, well, you pay taxes on that as well.
In the former model, taxes were collected so as to generate revenue to meet obligations to the next higher power and meet manor needs. It would be kinda stupid to get excessive about it, as you are only as successful as your estate, and showing off that wealth will only make you a target, either for higher contributions, peasant rage, or rival lords. Taxes in the current model are just retarded. They are spent as soon as they come in, for they must be... otherwise, obviously, the taxes are too high. When revenue falls however, the obligations created by boom years persist. If the values fall, the schools suffer as well as everything else, and it's just fucking retarded.
The system has only served to fuck everything up at every level.
So... simple and crazy fucking solution here:
All income tax levels stay the same, sales tax is abolished, property tax is abolished as well. You don't really "own" the land, so why not call it what it is... a SHARE. Don't live there? Don't pay taxes there? Then you are bought out and the land is held in common for someone else who is willing to buy into the community.
Local officials are elected locally. State officials are also elected, but only those who have proven themselves by deed at the local level are eligible. State level administration serves only to enact uniform laws and even out funds to those communities that need it. From the state leaderships comes a pool fit for national leadership, again, after proving themselves by deed at the state level. National leadership, is again, in place for snap decisions that require quick responses, as well as uniform laws and pitching national-level endeavors.
Taxes? It's ALL paid to the local level, and it's on the local level at which funding decisions for state programs are made. Undesired programs are simply not funded. If funding falls short, then the program is cut back or cancelled and those revenues are simply not collected. Based on prosperity are obligations due. From the state it flows to the national level, again, selectively choosing national endeavors.
The citizenry is free to work, live and generally do whatever they desire. As long as they have contributed to the local level, they are free to live out their days in their homes. Adjustments are made to ensure that a community of ultra-rich carry no special sway or favor. If you want to own multiple properties in multiple areas, then you pay taxes to both based on how long you live there... failure to pay those taxes for a set period of time results in loss of property with a return of share value as determined by the price which someone else was willing to pay.
Stupid shit simply is not funded. States and communities are free to work together to seek funding from others directly either out of charity or shared interest. Businesses are treated in a different regard, but with a system that encourages them to pay fair wages, ideally via employee ownership. Multinationals are taxed based on revenue per community... sucks to be them, but it's the only way to keep them honest, and it's retarded to pass those costs onto everyone else.
I'm not saying feudalism was great, but the current system is in most ways far far far worse for everyone apart from those pulling the strings.
Is December normally that Robust. I thought that was usually a slow month.
Is December normally that Robust. I thought that was usually a slow month.
Time for 0 down FHA loans!
And the HB that I have puts on, the one and only RYL, is about to turn mother fucking green!!!!!
After years of searching we're finally closing in on the 8th wonder of the world. Who'da node it was Government BULLSHIT?
How much of this misleading stats from Uncle Fraud is to benefit certain insiders. We all know that a lot of the HFT computers algorithms react t o news releases.
So if certain "insiders" get to go long before the releases and then short just before the revised figures come out, then presto, the rich get richer. What could be easier for those people bribing certain people that are responsible for the figures?
This type of article is why I love ZH!!!! Tracking numbers and statistics over time....showing patterns....and providing some background context from which one can make informed judgements. Yes...the numbers are available to one-and-all...and yes....I could create yet more spreadsheets in my spare time....but it is nice to be able to sign in and find this work done.
http://s296.photobucket.com/user/pacersfan33/media/biglebowski-markitzero-1.jpg.html
Two for Tuesday! Or what ever.
Much like the stock market, housing was a rather dull afterthought in the years leading up to ~1976 or therebouts. You either had a decent job and a minimum of 20% to put down - or you rented, simple. After 1981 - well, just look at any graph that tracks housing prices. It's been a runaway train ever since. And what was/is the corollary in all this? Credit - i.e., $Debt Expansion on Every level, both private and public. Hence the (desperate) need to keep housing prices stable and rising. Same old story. A $Debt-based system MUST continue to expand, else it collapses.
Your black lab qualified for a loan, my yellow lab was denied. Also didn't get into Berkley with a perfect SAT math score. Dat's racist!
Most real estate professionals and developers were notably SLOWER in November when the contracts were inked for December closings and the subsequent month was even slower. No chance December was the 2nd most robust month in terms of new home sales.
PLEASE correct this article. "just reported number of 481K new December home sales" The number is an annualized number for the year! Page 2 of the report shows the number for December at 34K homes sold.
This number that is the headline is the guess/estimate annualized year to year That means that they estimate 481K home to be sold from December 2014 through November 2015.
The report clearly states "An estimated 435,000 new homes were sold in 2014"
Re-post (I'm sorry), but feel it's somewhat telling...
For what it's worth... here's my recent experience in Brooklyn real estate (if anyone cares):
2010: I buy a 850sf 2-bed condo in williamsburg, brooklyn for $665k (with a 3.5% down FHA loan)
2012: I sell said condo for $1.06mln (listed at $995k). The three competing CASH buyers were, 1.) unnamed Russian buyer (a lot of these foreign cash buyers work through agents and are never named), 2.) unnamed Chinese buyer, and 3.) a rich lady from Colorado buying it for her 21yo daughter. I had ONE showing and was in contract within a week.
2012: I buy a 750sf 1.5-bed condo in prospect heights, brooklyn for $650k (20% down and I paid $30k over the $620k listing price).
2014 (Sept-Nov): I listed second condo at $745k (comps in building had recently gone for $730-745k). It took about 7-8 showings and I ended up punting it for $715k (spec investor buyer).
The real estate market here is very much slowing down / rolling over. And there are a FUCKING TON of new condos springing up all over Brooklyn. There is going to be a monstrous glut of inventory by this summer.
There is going to be a fucking BLOODBATH in real estate by the end of this year (or early 2016, at the very latest).
I'll have my down 60% bid ready to scoop up a desperate seller...
Cheers!