Home Sales Are Not What They Appear to Be

by: Market Blog

By David Berman

Before you get too excited about U.S. new home sales for April blasting past expectations, here’s a wet blanket: They’re still at depressed levels.

Home sales rose to 323,000 last month, a jump of 7.3 per cent. That was well ahead of a flat reading that economists had been expecting and marks the biggest monthly sales level in four months. Home builder Toll Brothers Inc. rose 1.2 per cent on the news and PulteGroup Inc. rose 1.9 per cent.

Does this gain in home sales mark a much-hoped for turnaround? Not so fast.

“A 7.3 per cent increase in sales sounds impressive but it was nowhere near large enough to be statistically significant: The Census Bureau says the margin of error is plus or minus 16.6 per cent,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

“In other words, the trend in new home sales is still broadly flat, at an extraordinarily depressed level. We can’t think of any other indicators which have fallen by 80 per cent from their peak and are yet to show any real improvement.”

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