"Unexpected Weakness In Home Sales"

by: Barry Ritholtz

"David F. Seiders, chief economist of the National Association of
Home Builders, said the unexpected weakness in recent months had caused him to shave his forecast for housing construction this year. It now shows a fall of 23 percent after a 14 percent drop in 2006." (emphasis added)
I spit my coffee out all over my keyboard when I read that WTF?!? line Thursday morning. Unexpected weakness? Seriously, some of these housing shills are starting to make Baghdad Bob look like a respectable spokesman.

What did the actual data show?

Well, for starters, we see sales of existing homes fell 3.8% -- the fourth consecutive monthly drop -- to a seasonally adjusted annual rate of 5.75 million units. For comparison purposes, this brings us back to the levels last seen in November 2002 -- prior to the ultra-low interest rate driven boom really ramped up.

On a year-over-year basis, June sales were off 11.4%.

Resales of single-family homes fell 3.5 percent to an annual rate of 5.01 million. Sales of condos and co-ops fell 6.3 percent to a 740,000 rate. Total Inventory dropped by 4.2%, a positive development.

0726bizwebexisthome The more volatile New Home Sales data are released later Thursday morning.

The media frequently mentions median price in these reports, but rarely explains what it means. I should give kudos to AP for at least making a partial attempt at clarifying the data. It noted "The median [price] is the point where half the homes sold for more and half for less." Ideally, one would explain that this can be skewed by either a drop in low end home sales or an increase in high end sales during the present weakness (and vice versa during the recent boom). 

And while I am handing out platitudes, Bloomberg gave good color on how both the New Home Sales and Existing Home Sales data are assembled:

"Monthly figures on home resales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier, while new-home sales are recorded when a contract is signed. Sales of existing homes account for about 85 percent of the U.S. housing market, and new-home sales make up the rest."

Perhaps this means all those rants were not for naught . . .


June Sales of Existing Homes Fell 3.8%

Home Resales in U.S. Fall 3.8% to 5.75 Million Rate
Joe Richter
Bloomberg, July 25 2007

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