"David F. Seiders, chief economist of the National Association of
Home Builders, said the unexpected weakness in recent months had caused
him to shave his forecast for housing construction this year. It now
shows a fall of 23 percent after a 14 percent drop in 2006." (emphasis added)
I spit my coffee out all over my keyboard when I read that WTF?!? line this morning. Unexpected weakness? Seriously, some of these housing shills are starting to make Baghdad Bob look like a respectable spokesman.
What did he actual data show?
Well, for starters, we see sales of existing homes fell 3.8% — the fourth consecutive monthly drop — to a seasonally adjusted annual rate of 5.75 million units. For comparison purposes, this brings us back to the levels last seen in November 2002 — prior to the ultra-low interest rate driven boom really ramped up.
On a year-over-year basis, June sales were off 11.4%.
Resales of single-family homes fell 3.5 percent to an annual rate of 5.01 million. Sales of condos and co-ops fell 6.3 percent to a 740,000 rate. Total Inventory dropped by 4.2%, a positive development.
The media frequently mentions median price in these reports, but rarely explains what it means. I should give kudos to AP for at least making a partial attempt at clarifying the data. They noted "The median [price] is the point where half the
homes sold for more and half for less." Ideally, one would explain that this can be skewed by either a drop in low end home sales or an increase in high end sales during the present weakness (and vice versa during the recent boom).
And while I am handing out platitudes, Bloomberg gave good color on how both the New Home Sales and Existing Home Sales data are assembled:
"Monthly figures on home resales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier, while new-home sales are recorded when a contract is signed. Sales of existing homes account for about 85 percent of the U.S. housing market, and new-home sales make up the rest."
Perhaps this means all those rants were not for naught . . .
UPDATE: July 26, 2007 10:05am
Miller Tabak’s Peter Bookvar notes that "June New Home Sales totaled a weaker than expected 834k, 56k less than expected and May was revised down by 22k. It’s just shy of its lowest level since mid 2000. Months supply rose to 7.8 months from 7.4 in May. The recent high was 8.3 in March. The median price fell 1.2% sequentially. This # measures contract signings of new homes and a weaker than expected # is certainly not surprising considering what we’ve heard from many homebuilders over the past few weeks.
Keep in mind that this data series is particularly unreliable, and subject to subsequent revision; to get a truer read, try using a 3/6 or 3/12 month moving averages."
June Sales of Existing Homes Fell 3.8%
ASSOCIATED PRESS, July 26, 2007
Home Resales in U.S. Fall 3.8% to 5.75 Million Rate
Bloomberg, July 25 2007