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New Home Sales Fell 41% in February 2009
Posted By Barry Ritholtz On March 26, 2009 @ 9:30 am In Data Analysis,Economy,Financial Press,Real Estate | Comments Disabled
WSJ : Sales of new homes rose in February for the first time in seven months, the Commerce Department reported Wednesday, another sign that the housing market is thawing
Bloomberg : Purchases of new homes in the U.S. unexpectedly rose in February from a record low as plummeting prices and cheaper mortgage rates lured some buyers. Sales increased 4.7 percent to an annual pace of 337,000 . . .
Marketwatch : The U.S. housing sector continues to see signs of improvement. The latest government data showed new home sales climbed in February for the first time in seven months, sending shares of home-building companies soaring.
A parade of the mathematically innumerate business writers (and even worse headline writers!) continue to misread data. The latest evidence? New Home Sales.
After incorrectly reporting the Existing Home Sales , the mainstream media misread the Census department report of New Homes.
No, New Home Sales data did not improve. In fact, they were not only not positive, they were actually horrific. The year over year number was a terrible down 41%. Sales from this same period a year ago have nearly been halved.
Why did the media report this as positive? If you only read the headline number, you saw a positive datapoint: February was plus 4.7% over January.
To get the the facts, you need to read below the headline. In the present case, it wasn’t the seasonality factor that was confusing, it was the “90-percent confidence intervals” — or as it is more commonly known, the margin of error.
From the Census Bureau:
Sales of new one-family houses in February 2009 were at a seasonally adjusted annual rate of 337,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7 percent (±18.3%)* above the revised January rate of 322,000, but is 41.1 percent (±7.9%) below the February 2008 estimate of 572,000.
The median sales price of new houses sold in February 2009 was $200,900; the average sales price was $251,000. The seasonally adjusted estimate of new houses for sale at the end of February was 330,000. This represents a supply of 12.2 months at the current sales rate.
Note that the month over month data at 4.7% — plus or minus 18.3% — is statistically insignificant. (i.e., meaningless). The reported data does not inform us if sales improved month-over-month or not. It is a range, from down -13.6% to plus 23%. Since “zero” is part of that range, we can draw no conclusion. As the Census Department itself notes, “the change is not statistically significant; that is, it is uncertain whether there was an increase or decrease.”
The data does however, tell us that the year-over-year sales fell 41.1% plus or minus 7.9% gives us a range of -49% to -33.2%. The entire range is negative, therefore we can conclude sales fell year-over-year.
These are facts. This is data. This is how you interpret it. Most of the MSM reports (WSJ, Marketwatch, Bloomberg) were simply wrong.
Not nuanced, not shaded, but 2+2=5 wrong.
Let me remind that many of these folks incorrectly misinformed you that Housing wasn’t getting worse in 2006, 2007 and 2008 — just as Home sales and prices went into an historic freefall. Now, these same folks are misinforming you that Housing has turned around and is improving. That is simply unsupported by the data.
(And don’t even ask about television — they simply read the wrong news. Here is a life lesson for you: Never believe news people who read teleprompters. They have no idea what they are doing, they are reading what someone else wrote. When it comes to data interpretation, they are quite literally clueless. Rely on news readers to your personal financial detriment).
The bottom line: Learn to interpret data correctly. Avoid using the people who cannot do so as primary news sources.
New Home Sales Annual Sales Rate, Seasonal Adjusted
Chart via Census Department 
A Closer Look at New Home Sales Data  (October 2006)
April New Home Sales – Revisited  (November 2005)
New Home Sales Fall 42%  (May 2008)
NEW RESIDENTIAL SALES IN FEBRUARY 2009 
New-Home Sales Rise 4.7% 
WSJ, MARCH 26, 2009
New-Home Sales in U.S. Rose 4.7% to a 337,000 Pace 
Bloomberg, March 25 2009
Home-builder shares jump as February new home sales increase 
Marketwatch, March 25, 2009
Unexpected Increase in Factory Orders 
NYT, March 25, 2009
The New York Times came closest to getting it right
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2009/03/new-home-sales-fell-41-in-february-2009/
URLs in this post:
 WSJ: http://online.wsj.com/article/SB123798406285137541.html
 Bloomberg: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0YI6z_ZfAUE
 Marketwatch: http://www.marketwatch.com/news/story/home-builder-shares-jump-february-new/story.aspx?guid=%7B66257BD6%2D693E%2D4518%2D888D%2D2A953FF42828%7D&dist=msr_12
 incorrectly reporting the Existing Home Sales: http://www.ritholtz.com/blog/2009/03/annual-existing-home-sales-errata/
 Image: http://www.ritholtz.com/blog/wp-content/uploads/2009/03/c25_curr1.gif
 Census Department: http://www.census.gov/briefrm/esbr/www/esbr051.html
 A Closer Look at New Home Sales Data: http://www.ritholtz.com/blog/2006/10/a-closer-look-at-new-home-sales-data/
 April New Home Sales – Revisited: http://www.ritholtz.com/blog/2005/11/new-home-sales-data-dont-rely-on-it-either/
 New Home Sales Fall 42%: http://www.ritholtz.com/blog/2008/05/new-home-sales-fall-42/
 Unexpected Increase in Factory Orders: http://www.nytimes.com/2009/03/26/business/economy/26econ.html
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