I’d like to point out a new feature in the usually astute WSJ: Printing erroneous information on the front page. Last month, in a front page, 3rd paragraph snafu, the Journal reported a 2.9% month-to-month change in existing home sales — a seasonal fa…

I see that the NAR has hired Crackhead Bob as their new headline writer, to wit: Existing-Home Sales to Stablize Before Upturn in Second Half of 2008. In a moment, we will discuss how the NAR managed to get their forecast exactly backwards. Meanwhile, …

If you look at dollar sales (i.e., unit sales multiplied by average price per unit), the effect is even more dramatic. Seasonally adjusted, sales in the Northeast were up by $21.7 billion, while the rest of the country was down by $6.2 billion. Another way of looking at the data: the increase in unit sales for the rest of the country was entirely explained by sharply lower month-over-month prices (down 1.9% on average), but unit sales in the Northeast were up even though prices in the Northeast were essentially flat (down only 0.1%).

Does anybody have any ideas about what might have happened in the Northeast? Is this weather-related? Is the economy in the Northeast better than the rest of the country? Or is it just an statistical anomaly?

I suspect that there is a problem with the seasonal adjustment for the Northeast. If you look at the past four years, there has been a large increase in seasonally-adjusted February sales for the Northeast each year – by 40K in 2005, 130K in 2006, 120K in 2007 and now 80K this year. A housing bear might point out that this year’s increase is below the average for the last three years and far below average for the last two.

I don’t have figures for years before 2005, which are available from the NAR only on a paid basis. (They used to be available free.) But I wouldn’t be surprised to see a similar pattern in previous years.

We will be getting close to a bottom when the next 6 months of ARM resets default and are foreclosed on 6-12 months later.

Until then prices will continue to drop, inventories will continue to grow and bank losses will continue to rise.

Fool me once, shame on me. Try to fool me 18 months in a row and you must be a NAR Economist.

OR

You can fool some of the people all the time, and all the people some of the time, but here is where NAR tries to make a liar out of Lincoln.

OR

How can you tell someone from NAR is lying …yes, their lips are moving.

Thanks …I’ll be here all week! :)

And for the earlier poster, NAR uses X-12 ARIMA model, so 29 days in february is not an issue for the seasonally adjusted data

http://www.realtor.org/Research.nsf/files/SAF_revisions.pdf/$FILE/SAF_revisions.pdf

In summary, who cares that year-over-year sales are down 23%, any genius would have guessed that based on the trend for the last 6 months. The fact that the month to month sales rate (after adjusting for normal seasonality) might actually be increasing is interesting news.

I doubt these are normal times, I’ll wait another few months before I start to believe we’re nearing a bottom in sales per month. Month to month numbers are always very noisy.

Further, at a 20% discount on house prices, that represents (5M*$266K*20%=)$266B disappearing into thin air.

And that is just the houses whose owners would like to sell. If you think about 130M households living in US, assuming half lives in single family housing (65M with avg price 266K), and the rest in apartments (65M with avg price 60K – which i conservatively made up), that tells me that 130M households, with average selling price of (65K*$266K + 65K*$60K =) $163K, and 20% haircut on the housing means $4.3T will just evaporate from the US HH wealth.

There is a bigger story here though. If you look at the data in each month, it looks like sales dropped substantially for all months after March 2006, except for Jan+Feb 2007. In other words, last year Jan and Feb were seeing almost boom-like activity levels, even though housing had slowed down for the prior 9 months and the following 14+. It appears that the seasonal patterns are getting weaker as activity slows down.

If we assume that last Jan+Feb were normal and are showing a new seasonality pattern, then that would suggest that the housing market is much weaker than it appears. The June/Feb ratio went from almost 2 in 2005 to about 1.5 in 2007. If that happens again this year, the June number would be around 400k-450k.

The seasonal adjustment multiplier for February is about 17, but last year the correct number would have been between 13 and 14. If we apply that to this year’s Feb data, then the estimated number of homes to be sold this year is only about 4 million.

All of this is based on assuming a trend from one data point, so it could be completely wrong.

See it here:

http://afferentinput.blogspot.com/2008/03/fed-existing-home-sales-bs.html