Don’t Get Too Excited About New Home Sales
March 2010 New Home Sales surged 27%, getting people who don’t follow the data series all hot and bothered.
Our advice? Calm down.
In February 2010, new Home Sales reached a record low. Bouncing off of those depressed levels is not a big deal.
And as we have discussed ad nauseum, new Home Sales are an extremely noisy data series, with a confidence level of ±21.1%
Over the past 10 years, double digit months have been followed by flat to negative data the very next month. That’s very likely due to the role Builders play in reporting the data to Commerce. The numbers work out over time, but any given month is quite suspect.
>
Click for ginormous charts
NSA New Home Sales
Courtesy of Calculated Risk
New Home Sales, 1963-Present
Courtesy of Calculated Risk
Courtesy of Barron’s Econoday
>
Previously:
New Home Sales Data: Don’t rely On It Either (November 30th, 2005)
http://www.ritholtz.com/blog/2005/11/new-home-sales-data-dont-rely-on-it-either/
Source:
NEW RESIDENTIAL SALES IN MARCH 2010
U.S. Department of Commerce, Manufacturing and Construction Division APRIL 23, 2010 AT 10:00 A.M. EDT
Erica Filipek or Stephen Cooper
http://www.census.gov/const/newressales.pdf
Tweet
Facebook
Reddit
Digg this!
April 23rd, 2010 at 10:50 am
This was a fundamentally weak report…perhaps unless you live in the South.
Last month in my Feb New Home Sales report, I called the bottom to New Home Sales…temporarily. Even writing is was embarrassing because the end of the tax credit was coming in April, builders knew this was their last best chance to dump a bunch of inventory and unlike Existing Sales that are counted when the sale closes, New Home Sales are counted when contracts are signed. We had to see a surge, period. But we didn’t get it.
March was not strong at all when you look at the real, non-seasonally adjusted numbers and prices. The end of the tax credit only accounted for 7k additional sales nationally over last March when the wheels were coming off of the fabric of society itself and there was no tax credit…when nobody was buying anything. In March 2010, there were virtually no sales gains seen anywhere in the Nation but the South that mysteriously jumped by 75%. Can’t wait to see revisions on that. These weak results are a huge sign of just how much demand was pulled forward last year.
Bottom line – In March 38k houses were sold vs 32k last March when the world was falling apart and there was no tax stimulus. In the Northeast, Mid-West and West sales were virtually unchanged MoM and YoY. If not for a mysterious 9k house sales jump (75%) in the South, March 2010 would have been FLAT relative to last year. In addition prices dumped MoM and on an average basis have given back all gains made YoY. Lastly, pay no attention to the seasonally adjusted numbers because you can’t seasonally adjust a stimulus month.
Below is the actual March new home sales counts. I don’t consider a mysterious 7k houses selling in the South coming into the end of a year-long tax credit — when all the other three regions barely moved MoM and YoY — any indication whatsoever of any fundamental strength in New Home Sales of a market recovery. Beneath this chart is my Feb’s New Home Sales report as a reference to where the market was and still is in the Northeast, Midwest and West.
April 23rd, 2010 at 11:09 am
@Mark: Anecodotally, here in the Twin Cities, I’m seeing many, many homes languish in the market, even as the deadline approaches, FWIW.
April 23rd, 2010 at 11:10 am
And MANY “for rent” signs abound. Far more than I’ve seen in the past 5 years here.
April 23rd, 2010 at 11:41 am
I’m starting to wonder about New Homes. Can we even build entry level homes in metro areas that are affordable anymore? Seems like the cost of improvements are getting so high that they skew the price point out of the entry level range.
April 23rd, 2010 at 11:43 am
Manny – sounds like Minny is catching up with the sun belt states. Wait till you start seeing the “first month free, no deposit” signs, if you aren’t already.
April 23rd, 2010 at 11:47 am
Breaking 9non-housing-related] News: The senior SEC staffer (mentioned in the reader comments to yesterday’s Thursday Reads thread) who was gorging on web porn during the height of the 2008 market meltdown apparently tried to get a personal bailout from the Fed … here is the leaked text of a letter he sent to Ben Bernanke:
“Dear Chairman Bernanke: I work at the SEC, and even though I am not classified as a bank holding company, I would like to apply for access to the Federal Reserve`s discount lending facilities, as I am currently having a liquidity crisis … in my pants.”
April 23rd, 2010 at 11:52 am
Home Sales Jump, but Outlook remains Cloudy
http://online.wsj.com/article/SB10001424052748704830404575200212503089010.html
…as opposed to those many times in history when the future was well-known.
April 23rd, 2010 at 12:37 pm
@Thor: I’m waiting for the gargantuan apartment building to be ready down the road. That will really put a hurting on some landlords. Just what we need – - more rental housing!
April 23rd, 2010 at 12:45 pm
The median home price fell to $214k from $221.6k. More lower priced homes to take advantage of the credit?
April 23rd, 2010 at 1:19 pm
Don’t forget – gov home buyer tax incentive program is pulling demand forward. Will it be extended?
I expect May/June/July to be depressed. I’m planning on shopping for an investment rental property starting in June.
Gordo
April 23rd, 2010 at 1:22 pm
Also – overall – me thinks we built too many housing units…
I read somewhere that something like 30% of housing units are occupied by a single person. Maybe 10% are 2nd homes, vacation rentals etc. If that isn’t a “richest country in the world” luxury – I don’t know what is.
Gordo
April 23rd, 2010 at 2:39 pm
Hmm… “calm down”? I dont get it.
You thought the 50 bps increase in the markets on this news was too much?
So its pretty easy to call that housing has “bottomed”. I would actually say it bounced big off year-ago depression bottoms in the auction / foreclosure markets… but no one tracks this and its complicated.
Just because it has “bottomed” does not mean there is a new “boom”. That may never happen again (demographics) or it may not happen for 5-10-20 years. But by the same token, we dont have to worry about mortgage losses, and the bursting of a housing bubble either – its over.
Lots of people here seem to still be worried. What was it last summer — “commercial re is the next shoe to drop”? — please go find Ben Stein in a coffee shop in some delightful 3rd world country. Ivan Boesky will walk in to chat. Travelling is your new love.
April 23rd, 2010 at 4:39 pm
gordo,
that’s an interesting idea (“shopping for an investment rental property starting in June.”), what kind of #’s are you using for future Property Tax liabilities, higher? and, if higher, how much?
then, along the lines of your other post, http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=fewer+households– is that ‘Rent’ positive?
April 23rd, 2010 at 4:48 pm
cognos,
“Worried” about what?
Do I have to understand this nonsense about traveling? Who is Ivan Boesky? And why should anyone meet Ben Stein with respect to commercial real estate?
(http://www.cnbc.com/id/36085517/Half_of_Commercial_Mortgages_to_Be_Underwater_Warren)
Moody’s Commercial Property Price Index:
http://web.mit.edu/cre/research/credl/rca.html
Move on. Nothing to see here, apparently (according to cognos).
April 24th, 2010 at 5:36 am
I wonder how much of the anomaly in the South was due to early Baby Boomer soon-to-be-retirees picking up depressed RE in south Florida. I know of some that pulled the trigger figuring that the market there was bottoming, rates were low and, what the heck, a 10% gift from the government was a nice sweetener that justified holding the property for a couple years. Or was that 75% increase spread widely in the South?
April 24th, 2010 at 3:00 pm
[...] seasonal adjustments add noise to the reports, and new home sales themselves are noisy numbers with lots of fluctuations that disguise the trend. Yesterday the S&P warned that the [...]