New Home Sales Rebound! (Sales Drop 23.5%; Prices Fell 13%)

[update below] Thursday morning, Commerce released the New Residential Sales data (pdf file).

Encouragingly, the media has caught on to the monthly nonsense built into the way numbers get reported, as evidenced by this WSJ headline: New-Home Sales Post Modest Gain Because Prior Months Revised Down.

As we noted same time last month on "No, New Homes Sales DID NOT Rise...", the game is to report the present UNREVISED latest data versus the revised lower last month's data.

Example: September 2007 sales of new one-family houses were initially reported at 770,000, up 4.8% from the prior month's downward revision of 735,000.

As we warned, that phantom 4.8% gain was likely to disappear when the revisions get reported: Surprise! September got revised down to 716,000 -- that swung the monthly numbers to a loss of 2.6%. Not very astonishing -- all you need to do is read the data and do the math.

For the latest month of data, we see the same pattern emerge:

- The year-over-year change from October 2006 is minus 23.5%; (The statistically significant margin of error was ±10.3%).

- The median sales price of new houses sold in October 2007 dropped 13% to $217,800 -- a significant drop from October 2006 price of $250,400; (average sales price dropped exactly $1,000 to $305,800). Month to month, prices fell 8.6%.

- Initial number of new one-family houses sold October 2007 was 728,000 -- this will likely be revised downwards, also winging it to a loss.

- The fractional initial unrevised gain of 1.7% has a margin of error of ±11.0%, and therefore is not statistically significant.

- Inventory improved, falling 6.7%, representing an 8.5 month supply at the current sales rate.

NOTE: New Home Sales are a measure of contract signings, and do not reflect cancellation rates, which remain significantly elevated in the 20-40% range.

~~~

While Homebuilders have been doing what they can to cut inventory levels, the problem they face is competition from existing homes for sale -- which make up more than 80% of total Homes for sale inventory.

Chart courtesy of Barron's and Econoday

Sources:
NEW RESIDENTIAL SALES IN OCTOBER 2007>
Commerce Dept, Novermber 29, 2007
http://www.census.gov/const/newressales.pdf

New-Home Sales Post Modest Gain Because Prior Months Revised Down
JEFF BATER
WSJ, November 29, 2007 10:27 a.m.
http://online.wsj.com/article/SB119634282761107912.html

Update: I was chatting with a friend about taking apart the New Housing Sales data, and he asked -- "Gee, how far do you think that's from the top?"

A few clicks later -- and courtesy of Asha G. Bangalore, we learn that sales of new single-family homes are down 47.6% from their peak in July 2005.

To contextualize this, if the current path continues into 2008, Centex CEO Timothy Eller said to Bloomberg, "This looks like it's going to be the deepest correction of any housing correction since World War II."

Truly amazing.

Sources:
Existing Home Sales - Sales and Prices Are Down, Inventories Keep Climbing Up
Asha G. Bangalore,
Northern Trust, November 28, 2007
http://tinyurl.com/28wh2o

Housing Slump's Third Year Will Be `Deepest' Since World War II
Dan Levy and Brian Louis
Bloomberg, Nov. 30 2007
http://www.bloomberg.com/apps/news?pid=20601109&sid=aW1lrGeadgHI&

Comments

[jackh]

Have a look at the NY Times......

The Dollar Is Falling, and That’s Good News




Article Tools Sponsored By
By TYLER COWEN
Published: December 2, 2007

[Georealist]

New homes sales statistics are useless! They could be up 40% and it would tell us absolutely, positively NOTHING about the housing market. Other pieces of information are necessary that will only show up later in Income/Loss statements of builders..For instance, when any new project comes on line..or even a single spec home..the builder projects a sale price. The ask price. My guess is that the current price is no more than 60-70% of that original projected ask price. In San Jose CA 20-30% reductions of original pricing on existing home sales is not unusual..and San Jose is one of the better markets. Home builders are in a world of trouble and not many will survive in their current form.

[DuffBeer]

I have been a Realtor for the last 22yrs assisting people in the south suburban are if Chicago.
This is a difficult market place in good times but I have managed to close 4 to 6 million a year most of the time. 2007 not so good, my worst ever. I knew this mess would happen the day they started taking the apps for the sub prime loans. I am bit old fashion I believed that if you have no risk you will do dangerous and stupid things. These buyers had no risk and nothing but a house to lose.
As for the numbers I never put much faith in them. I sure would not base an investment on NAR's figures or any of the brokers.
Want the truth ask the spouse of a Realtor,Developers,Bui... Inspector, Tile Company,Construction workers and on and on.
THE SPOUSE,that is where you will get the truth about numbers. Watch for the fall out in all these professions. Shortly the yearly membership, association and union dues ,fees, or payments are due. Lots of career changes ahead for many. I started my education shortly after the sub prime began ,glad I did .
Oh yes what about these developments and projects ??? What bank is going to lend them money to pay for the invest and then what bank is going to lend them the money to pay for that interest ??? What a mess !!!!!!
DuffBeer

[gordon]

Barry- here's the next scam coming to Wall St.: Dec foreclosures will be down because it looks bad / bad pr to throw overleveraged dumbasses (deadbeats) out during the holidays, Crudlow will seize on this in January!