Tuesday, December 24, 2013

Today's New Home Sales Report For November: Complete Fiction

I'll have a lot more in-depth detail in a couple days, but suffice it to say that today's new home sales report, prepared and released by the Government's Census Bureau, goes beyond the bounds of all credibility.

Please note:  the headline number is a seasonally adjusted annualized number.  We have no idea how they statistically engineer that final number but there's no way it's even remotely accurate.  To begin, the Government significantly revised higher the numbers originally reported for September and October.  Does it make sense that October had new home sales that were higher than for June - June being the seasonally strongest month for home sales?  It gets better.  Based on the revised numbers for Sept/Oct plus today's number for November, the 3 month average for Sept-Nov was a 447,000 seasonally adjusted annualized rate.  It exceeds the 3 month average for June- Aug by 44,000.  Is it even possible for that to happen considering the strong seasonality of housing, with June-Aug being by far the strongest seasonal months?  Sorry the numbers are not believable.

Layer onto that the Government shut-down, which seems to have affected every business statistic out there negatively except a few that are being reported by the Government.  In addition, mortgage purchase applications have plunged over the last three months.  Purchase applications have declined in 9 of the last 13 weeks.  How can new home sales possibly be higher when 90% of all new homes are purchased using mortgages?  If you take just the estimated actual number for November of 33k homes sold and simply annualize it, you get a 396,000 annualized rate.  This would overstate the actual rate because November is typically a slow seasonal month.  I have no idea where the Government's 464,000 estimate came from and I doubt anyone else does either.

Getting back to mortgage applications, here's a chart for purchase applications (source:  Calculated Risk blog):

The Government wants us to believe that new homes sales increased despite that sharp fall off in applications for mortgages used to purchase new homes, which finance 90% of all new home sales.  Finally, interest rates have been climbing steadily higher since early October.  In fact, 30-yr fixed rates have spiked up from 4.10% at the end of October to their current 4.47%.  And that rate is for a 20% down mortgage and perfect credit. 

So I'll leave it up to you to decide if you think the Government new housing report is even remotely believable.


  1. They now give lying awards in DC.

  2. Lord knows that US government numbers are suspect to say the least. But you know, a sale is not contingent on a mortgage application if the buyer has cash. Could cash transactions explain some of the discrepancies?

    1. No. Typically the all cash buyers are buying existing homes to convert into rentals. Unless it's an apart/condo unit that is intended to be for renting, most new homes are bought by organic purchases who use a mortgage.

    2. Agreed. Cash transactions are typically going to be more astute buyers, and most of them aren't foolish enough to pay currently inflated prices, average price of new homes hitting record highs. The sad part is that the government forced this inflation in the housing market to help banks stay in business. Meanwhile, people who need/want to buy a decent home are getting screwed by the inflation in the market.

  3. You have entered another dimension of space and time, where numbers are reported at a speed which distorts all reality. Propaganda is the blue plate special and it is served monthly for your perusal. You have entered the U.S.S.A. zone.

  4. Oh, Dave, how silly of you! You shouldn't have argued with that real estate moron. That was a sheer waste of time. Sheeple of this kind are beyond rescue. You should have said to that critter something like “You are absolutely a genius!", "Real Estate is an opportunity of one's life time!" or "Gold and silver are on the way to ZERO!" It's Christmas. You should be benevolent. You should have brought happiness to that critter.

  5. Merry Christmas Dave!!

  6. Global shipping service company Fedex has cut its full-year profit forecast, warning that the global economy is continuing to weaken.

    The company, whose earnings are widely watched because of the number of countries it does business in said its net income for the first quarter had fallen 1% on last year to $459m.

    Fedex said it expected annual profits to be about 10% lower than expected.


    Recoveeeeerrrrry!!!! YIPPIE!!!!!!

  7. After “End” of French Recession, GDP Goes Negative

    "The French economy continues to struggle as third quarter GDP growth dropped back into negative territory just a few months after the nation’s finance minister proclaimed the end of the French recession based on a single quarter of positive GDP growth. Additionally, in line with weaker GDP, growth in French exports, which represent more than a quarter of GDP, went negative in the third quarter following a pop in the prior quarter. If there is to be hope for a French recovery, exports will likely need to reverse course."