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New Home Sales Notoriously Unreliable

Posted By Barry Ritholtz On March 23, 2011 @ 2:44 pm In Data Analysis,Real Estate | Comments Disabled

I want to direct your attention at two items related to New Home Sales: The chart below, and a post from 2005:

First, the post: New Home Sales Data: Don’t rely On It Either [1] New Home Sales, which depend in large part on wself-reporting to Census from Home builders, are not especially reliable. There is a get to it next month quality that means any given month’s data can be wildly off. You are much better off taking a moving average of three months rather than relying on a single monthly data point.

Second, have a look at the trend of the New Home Sales chart:  If you doubted my statement this morning that home prices remain overvalued, the chart makes that issue clear. Why buy a brand new home when 2 year old existing homes are selling for so much less?

Take a look at the historical peaks and valleys in the 1960s, 70s, and 80s. That changed in the 1990s — it broke out to a new level — a combination of population growth and a booming stock market led to some profit rotation from Equities into  Real Estate.

The final phase was an entirely different order of magnitude . . .

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The Residential Real Estate Ugliness in One Chart

click for larger ugliness
[2]
Original chart Calculated Risk [3]; Annotations The Big Picture [4]

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Previously:
New Home Sales Data: Don’t rely On It Either [1] (November 30th, 2005)

Should You Buy a Home? Looking (Again) at Housing [5] (March 23, 2011)


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2011/03/new-home-sales-notoriously-unreliable/

URLs in this post:

[1] New Home Sales Data: Don’t rely On It Either: http://www.ritholtz.com/blog/2005/11/new-home-sales-data-dont-rely-on-it-either/

[2] Image: http://www.ritholtz.com/blog/wp-content/uploads/2011/03/NHSFeb20111.jpg

[3] Calculated Risk: http://www.calculatedriskblog.com/2011/03/new-home-sales-fall-to-record-low-in.html

[4] The Big Picture: http://www.ritholtz.com/blog

[5] Should You Buy a Home? Looking (Again) at Housing: http://www.ritholtz.com/blog/2011/03/looking-again-at-housing/

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