Get ready for another round of bad reporting:

The $8,000 Fed tax credit (1st time buyers) and a $10,000 California tax credit (new homes only) likely helped out in NHS this month. Falling prices are also contributing to sales activity of the sector, which represents about 15% of the overall housing market.

Here is the official New Home Sales:

Sales of new one-family houses in June 2009 were at a seasonally adjusted annual rate of 384,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.0 percent (±13.2%)* above the revised May rate of 346,000, but is 21.3 percent (±11.4%) below the June 2008 estimate of 488,000.

Thus, we in fact know that Sales fell from last year. They were down 21.3%, a number greater than the margin of error.

The monthly data, on the other hand, is not statistically significant. Therefore we DO NOT KNOW what the change was from last month, as the margin of error is greater than the reported data point.

The usual suspects got it wrong, as they do every month.

If New Home Sales are so strong, then can anyone explain why prices are still plummeting? Median home prices dropped 12% year-over-year, and 5.8% from the prior month.



Chart via Calculated Risk


New Home Sales Data: Don’t rely On It Either (November 30th, 2005)

Census, HUD, JULY 27, 2009 AT 10:00 A.M. EDT

Category: Data Analysis, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

122 Responses to “New Home Sales Fall 21.3%”

  1. ben22 says:

    sorry for all the typos in my post above

  2. Mannwich says:

    @ahab: Agreed. It’s pulling future production forward, while jacking up our debt to do it. This will be the solution every time until we’re forced by some extraneous factor (the Chinese?) to stop.

    @ben22: Good one. I think it’s also good to take a step away from this stuff from time to time and simply enjoy life. Does wonders for my mental health.

  3. ben22 says:


    I’m not so sure about this:

    No they are quickly running out of the 1 billion in the current program, so if they find they need another incentive program, they would probably cut it down to $2,500 and make it a little less about improving energy efficiency and more about getting old cars scrapped (perhaps by letting the old cars have up to 25 mpg and/or just requirering the new to do at least 5mpg better than the old).

    You do remember it’s the govie doing this right, like they ever move that quick.

    Here’s the thing, again, unless I misunderstand the program.

    When this money runs out, if you are stuck at the back of the line you could still be on the hook for the $4,500 in the contract you sign with the dealer if there is no money left in the program. If that happens and even a few people get burned, your second installment idea for $2,500 will be dead before it even starts. Nobody will want to get into it then for fear of being last in line.

  4. rootless_cosmopolitan says:

    “in other words, year-over-year sales could have dropped anywhere from 9.9% to 32.7%.


    BR: Precisely. ”

    Well, to be actually precise, anywhere within this interval with 90% probability, assuming this is the probability of significance, on which the margin of error is based. Then there is a also 10% probability that the increase was smaller or larger.


  5. Thor says:

    Not sure if anyone else has posted this – if not, here it is again. The most striking numbers for the new home sales are as follows.

    “Four years ago, during the height of the housing boom, the sales rate for June was 1,374,000″

    So we’re roughly 1 million new homes off the peak.

  6. Onlooker from Troy says:

    ahab and Mannwich

    I agree also with your take on cash for clunkers. It’s just so much B.S. How many people will it really incentivize to buy that weren’t going to anyway in the near future? No way to really tell but there will be many who would have bought anyway and will take Uncle Sam’s sucker money. These programs are ridiculous. And they’re also just another poke in the eye to those who have been prudent and conservative. Sure we could take advantage, but I don’t want or need a new car!

    Sorry, I’m not buying it, figuratively or literally.

  7. DeDude says:

    The program gives $3500 or $4500 depending on a few things so the 250 was just landing in the middle (but there is not a lot of difference between if its 222K or 250K or 286K). I agree it is hard to say how many of those people were anyway going to by a new car within a month, a few months, a year, or several years. So the actual additional sales within any given timeframe are hard to predict. The longer (5 years) time frame will not see much of any effect, but the idea is that we need the stimulus NOW so it actually doesn’t matter that we are borrowing demand from the future if the stimulus makes a difference as to whether there is a future (with a demand), or just a bunch of Hoverville tent-camps in the woods.

    What appears to be without question is that the program is not going to have difficulty finding takers and dispensing the rebates before the end of the year. Although I can afford it, there are certainly also a number of people who could not afford a new car without the additional $4500 rebate. New car sales are currently way below “replacement” rates and they were way above in the boom times, in the long run they will have to get into balance. If we sink into 25% unemployment and 50’ies living standards that number is a lot lower than if we stay below 12% and get credit restored to a more normal level. So I can’t say if we will get back to the 2007 sales numbers in 2010.

    The dealers will probably be having a harder time with a second car sales program than the first if they have fooled a lot of people the first time around. But my guess is that any second program would apply to those rejected in the first (and put them first in line). However, as previously said I am afraid that the economic numbers will start looking so good for the rest of this year that additional stimulus becomes politically impossible, cannot be passed when needed, and we get a nasty second dip in 2010. I hope I am wrong.

    Now the final proof of how well this program worked or not will come in about 6 month when we look at how much about trend line the new car sales numbers are for June until the program runs out of money. We should revisit at that time.

  8. matt says:

    Re: Cash for clunkers

    This is just another moral hazard – They are giving people money for buying gas guzzlers and excluding the more prudent people who bought fuel efficient cars. Both types of people might need new cars this, year; only one type gets a subsidy.

    It seems that if you travel in the heard, the government saves you, no matter how dumb.

  9. ben22 says:


    You had a pretty good argument going until it was based on:

    and get credit restored to a more normal level.

    If this is one of your conditions for how things turnaround then we haven’t even started. Like you say, will be interesting to come back and revisit all of this in six months time, I’m certain none of us will forget to do so.

  10. [...] Ritholtz, at The Big Picture, meanwhile,  argues that the monthly data  is not statistically significant. “… WE DO [...]

  11. DeDude says:

    ben; I happens to believe we had outrageously easy credit for a long time, then shifted to way to stringent credit conditions in October 2008 and will hopefully get to a reasonably credit stringency within not to long.

  12. rootless_cosmopolitan says:

    I said:

    “Then there is a also 10% probability that the increase was smaller or larger.”

    Not “increase”. Decrease, of course.


  13. ben22 says:


    Sorry but if you think what happened in October was a result of us going to stringent lending standards then you may not have a clue about what is really going on. I suggest taking a look at this chart again for an understanding of where we’ve been and where we are when it comes to credit expansion.

  14. Thor says:

    DeDude – Personally, I would hope that these ‘more stringent” lending standards are the new norm. We’ve seen what the average person does with too much easy credit and where it’s gotten us. Forcing most of us to live within our means for at least the next several years is one of the ways I think we’ll pull ourselves out of this.

  15. DeDude says:

    I did not state that october was not the “result” of lending standards, just that we switched to to stringent a lending standard at that time. And I am not judging lending stringency by moral standards or even what is best for the individual. I am simply looking at what it does to the economy to switch from pre-October to post-October stringency – and that is very bad. After the economy has recovered, it may be preferable for us to get to even more stringent standards than we have had in the last decade. It’s the velocity of the change that hurts the economy.

  16. DeDude says:

    Lets say a company has been working fine and made a profit with a (yes agree irresponsible) model where every payday it loans 90 million of its 100 million cost for salaries – and slowly pays it all back just before the next pay day. It also pays out what corresponds to 5 million in dividends per pay period to its shareholders. This has worked great for years and every body were happy (including the bank that made a fair amount of money on the line of credit). Suddenly a credit crunch comes along and credit is getting very stringent so the bank cancels the line. Result is bancrupcy; huge amounts of money is lost, hundreds of people lose their job (and 100 million of taxable salaries disappear), and the factory is left empty to rot after all that was in it has been sold at huge discount for scrap. All of that could have been avoided if the velocity of change in credit stringency had been slowed down and the reduction in the credit line had been less than 5 million per pay period until the line was zero (instead of the sudden cancellation). End result is the same credit stringency (no more payday loans for the company), but the velocity makes a huge difference in end result for company, workers and taxbase. The same goes for changes in stringency of consumer credit, if you change it to fast the result is a lot of unnessesary pain for everybody including society. So get there, yes, but get there at a pace that can be absorbed.

  17. cvienne says:

    I’ve been away for a bit but I see this “cash for clunkers” argument has been forwarded just a bit…

    I’m at a slight loss here because I’m just browsing the various posts, but if I may, I’d like to consolidate my opinion…

    I basically am on board with most of what DeDude has been saying (but I’ll stick to what I CONSIDER the highlights)…

    - First of all, I ACTUALLY DO think the program will be a success (I will either be right or wrong in 6 months)…we’ll revisit this…It was a tremendous success in Europe, and I know quite a few here who have creatively taken advantage of the program.
    - I DON’T put the program in the same category of tax credits for 1st time homebuyers (for reasons that will likely be evident in my following bullet points).
    - I think DeDudes estimate of 250,000 vehicles might be a pretty good educated guess.
    - I think if the program ends up to be a success, then they can easily allocate more funding for it going forward (after all – what’s a billion these days?)
    - I DON’T think of this as the same type of moral hazard (because there IS sort of an efficiency gained by “incentivizing” new purchases of more energy efficient vehicles).
    - I DEFINITELY DON’T THINK that “credit” is an issue here…In many cases (depending on where a person is in their balance history), a person could actually IMPROVE their cash flow by trading in an old car, and extending the financing on a new one…I KNOW, it’s hard to argue that one because there are so many individual variables, but my gut tells me the aggregate could be to ease the present burden.

    Lastly (and this is probably THE most important – and I think this is where DeDude was leading)

    - Success in this program is an efficient way to reduce INVENTORY at a time where that is badly needed…

    So what if nobody thinks anyone will ever buy a car again…Let’s just say that IN CASE THEY DO someone will have to build a new car…Low inventories will mean that they’ll have to fire up the production lines at some point (be it 2010 or 2015)…

    It’s a step in the right direction…

  18. philipat says:

    Next Month should be fun. Seasonality starts to work against monthly data as from August. So we can now anticipate the headlines one month from now, along the lines of “Unexpected drop in housing sales”?!!

  19. [...] Still, the improvement in prices follows three other pieces of housing news reported recently: June Housing Starts were up 3.6%, June Existing Home Sales rose 3.6% and June New Home Sales increased by 11%. Same deal with all of these reports–the general year over year looks ugly, but the month over month shows signs of life. One more thing: the margin for error on housing stats is huge. [...]

  20. [...] Still, the improvement in prices follows three other pieces of housing news reported recently: June Housing Starts were up 3.6%, June Existing Home Sales rose 3.6% and June New Home Sales increased by 11%. Same deal with all of these reports–the general year over year looks ugly, but the month over month shows signs of life. One more thing: the margin for error on housing stats is huge. [...]