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New Home Sales Bad In June - Should You Take This Information To The Bank?

US Census seasonally adjusted data comes from another planet. Of all the government agencies - their take on the raw data hardly ever correlates to my view. And the data gathering anomalies with significant backward revisions make new home sales act like one is on a roller coaster.

The headlines say new home sales declined from last month. The rolling averages smooth out much of the uneven data produced in this series - and this month there was an improvement in the rolling averages. The data was revised downward in the previous months making the bad headlines even worse than first glance.

As the data is noisy, the 3 month rolling average is the way to look at this data. This data series is suffering from methodology issues. Econintersect analysis:

  • unadjusted sales growth accelerated 6.8 % month-over-month (after last month's revised deceleration of 16.6%).
  • unadjusted year-over-year sales up 18.4% (Last month was up 11.6%). Growth this month is on the high end of the range of growth seen last 12 months.
  • three month unadjusted trend rate of growth accelerated 0.2% month-over-month - is up 19.2% year-over-year.
Unadjusted Year-over-Year Rate of Growth - Sales (blue line) and 3 month rolling average of Sales (red line)

US Census Headlines:

  • seasonally adjusted sales down 6.8% month-over-month
  • seasonally adjusted year-over-year sales up 18.1%
  • market expected (from Bloomberg) seasonally adjusted annualized sales of 535K to 570K (consensus 550K) versus the actual at 482.

The quantity of new single family homes for sale remains well below historical levels.

Seasonally Adjusted New Homes for Sale

The bottom line is that new home sales remain generally on an uptrend - and you just gotta ignore the roller coaster effects of the individual monthly releases.

Other Economic News this Week:

The Econintersect Economic Index for July 2015 strengthened partially reversing last month's decline. Still, the tracked sectors of the economy remain relatively soft with most expanding at the lower end of the range seen since the end of the Great Recession. Thinking through the reasons for this month's increase, it was the improvement in a few areas from terrible to marginal growth.

The ECRI WLI growth index is now in positive territory but still indicates the economy will have little growth 6 months from today.

Current ECRI WLI Growth Index

The market was expecting the weekly initial unemployment claims at 275,000 to 300,000 (consensus 279,000) vs the 255,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 282,500 (reported last week as 282,500) to 278,500. The rolling averages generally have been equal to or under 300,000 since August 2014.

Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line), 2015 (violet line)

Bankruptcies this Week: Privately-held Great Atlantic & Pacific Tea (aka A&P), AmeriResource Technologies, Corporate Resource Services

Please visit our landing page for all analysis for the past week.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.