Monday, July 27, 2009

New Home Sales Report is a Farce

The Commerce Department released new homes sales for June today and the spinmeisters on CNBC et. al. were gleefully exalting the 11% rise over in "estimated" new home sales for June. But let's examine the "caveat" footnote that accompanies the release:

"* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero" (emphasis is mine).

This means that Government-reported number that caused the stock market to spike higher on the release may actually be a completely useless and meaningless number.

And in fact, the number estimated for June 2009 is over 21% below the number estimated number for June.

Here's the full release:

Is this the kind of data you want your money manager to base your investments on? The reality is that the Government has no idea what the real number is for new home sales. Given that we know for a fact that a lot less people are employed every month and that the ability to get mortgage financing is exceedingly more difficult, especially for non-conforming mortgages over $417,000, it is safe to say that the new home sales for June was much lower than is being reported and would probably shock all of us in its paucity if we knew the truth.