Here’s an excerpt:
"Tuesday’s new-home sales data of plus 13% month over month was such an outlier that I had to dig into the details of the
report, which came from the U.S. Census Bureau and the Department of Housing and
Urban Development, especially given all the other nonconfirming data we have
seen. We also learned Tuesday that unsold house inventory is at its highest
since April 1986. (Note that the existing-homes number is about six times the
actual number of new homes.)
Other data are similar: MBA mortgage applications were soft, NAHB/Wells Fargo
notes that new sales have been cooling, and the Housing Market Index (HMI) is
less than robust. The Wall Street Journal quoted Banc of America
Securities analyst Daniel Oppenheim as saying the report "appears to be an
aberration." His firm’s survey of homebuilders shows that demand has been
So too says the National Association of Home Builders’ chief economist, Dave
Seiders, who termed the latest sales data "bizarre." He said his group’s recent
surveys indicate that sales generally have been slowing.
All these anomalies caused me to tear apart the Census Bureau’s data and its
methodology (along with the assistance of the very able statisticians at
Census). I discovered three items worth mentioning:
- The data appear to be "statistically insignificant," according to the Census
- Strong historical numbers (like plus 13%) tend to be subject to revision but
mostly stay net positive, albeit somewhat moderated.
- Over the past 15 years, double-digit months have generally been followed by
flat to negative data the next month (mean reversion).
That about sums it up.
Home Sales Data: Lots of Huffing and Puffing
Real Money, 12/01/05