Wednesday, August 26, 2009

Was Today's New Home Sales Number For Real?

To be blunt:  No.  As has been discussed and analyzed ad nauseum, the Government likes to release, and the mainstream media and Wall Street thiefs like to report, economic number numbers which have been "seasonally adjusted" and often bear no resemblence to reality and typically are subjected to future downward revisions which no one pays attention to.

With that in mind, let's review today's new home sales release, which was greeted with great fanfare on Wall Street and CNBC, as it was announced that July's new home sales (seasonally adjusted) increased 9.6% from June.

Let's look at the raw, unadjusted data, which can be found buried here: Census Bureau New Home Sales.  July '08 to July '09 new home sales declined 9.3%.  June to July this year did increase 8.3%, but was less than the "seasonally adjusted" nonsense, but keep in mind that your $8k taxpayer subsidy has fueled a small boom in lower priced homes, which is reflected in the decline in the home price metric. The median home price declined 13% $210,000.  And finally, as points out, July's non-seasonally adjusted new home sales number was the 3rd lowest for the month of July since the Census Bureau started tracking sales in 1963.

Oh, and one more point, as per homebuilder earnings reports for the 2nd quarter, cancellation rates are still running generally in excess of 20% (usually financing falls through).  The Census Bureau does not take that into account and they do not back out actual cancellations when they revise past calculations. 

Do not be sucked into the fanatasy that the Government and Wall Street is spinning right now.  There is a monster wave of prime mortgage-financed homes which will hit the market before the end of the year and if Obama doesn't extend the Taxpayer Cash for Homes program, expect a cliff-dive in home sales at the lower end, as homebuyers are now allowed to credit the $8k tax credit as part of the their down payment - back to almost no-money-down mortgages again.  Just like with the Taxpayer Cash to GM/Ford program, which saw interest and usage run out well before it was slated to expire, in all likelihood by the time Dec 1 arrives, most people who could get financing for a home using the tax credit will have already done so and even an extension of the program will not maintain current sales rates.


  1. The uselessness of government data (as a barometer of real economic activity) has been known for a very long time. Frankly, forget the CPI, PPI, pending home sales, durable goods, etc. I'd like to see indices developed on the loss of American freedoms; growth in unelected officials' positions (czars) in Washington; and something to indicate the growth in anti-capitalists on Capitol Hill since, for instance, 2000 to the present. I would bet the latter would show a spike to rival Mt. McKinley since January of this year.