No, New Homes Sales DID NOT Rise . . .

I could not agree more. Going through the figures in detail then comparing to the AP and CBS marketwatch news releases I thought I was comparing two different reports. The media headlines on this morning’s new home sales news release are so bad, they can only be construed as purposeful in their intent to mislead. It seems the David Lareah a.k.a. Lawrence Yun syndrome is spreading faster than the California fires.

1) “Statistically insignificant” is not the same as “not statistically significant.” Most people use the term incorrectly, as you have here. Type the term into google for some detailed explanations. [BR: Fixed above]

2) Statistical significance is also not the same as substantive significance. There can be an important result that does not attain statistical significance because of sample size. There are also unimportant results that are statistically significant — meaning that the sample is big enough that we are confident, for example, that a change is non-zero.

3) Comparing this month with the original release from the prior month is not “apples to apples” but rather the intentional use of data known to be incorrect. No one does this. You cover the non-farm payrolls every month. Do you think they measure the widely followed change based upon “original releases?”

So — your headline is not supported by the data in your post or in the release. We all understand that it is a noisy series. We do not know whether sales actually increased last month because the sample is too small. But neither can you conclude that sales did NOT increase.

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BR: Jeff: I agree that, based on this data, you cannot draw any conclusion on a month to month basis. I thought I made that clear above; I’ll clarify that.

“What we can tell about month to month sales is that they may — or may not have — increased (we just don’t know).”

Barry,
I think you are wasting your time watching the housing market as the main cause of the next recession. It just doesn’t affect enough people to seriously damage the economy. What we need to watch is energy. Pretty much every time oil has spiked over 100% within a year a recession has followed. We started the year at $50. At $100 things will start to look a bit dicey for the US economy.

“Comparing this month with the original release from the prior month is not “apples to apples” but rather the intentional use of data known to be incorrect. No one does this. You cover the non-farm payrolls every month. Do you think they measure the widely followed change based upon “original releases?””

What??? of course they do. Holy cow where have you been. It’s one of the common ploys. Lower the previous month figure so you can say you beat last month. Here’s a simple illustration. Say you have 12 months of collapsing home sales, each month lower than the prior month. When the current month is released, concurrent downward revision of the prior month is also reported and voila, for each month’s headline, sales were reported up compared to last month even though at the end of 12 months, sales fell each and every month. That’s the game being played. People need to see through this.

Mortgage remits are in y’day and today. Bottom line: THEY TOTALLY AND COMPLETELY AND UTTERLY SUCK. You heard it hear first. The meltdown in the ABS/mortgage space continues. AA ABX index is down 6 points today alone. Big move. The divergence between credit and equity continues until it cannot continue. I suspect either credit improves (unlikely) or equity unravels (also unlikely — ha ha).

Barry,
Can you please ask Kudlow on your next appearance how he went from “no cut – we need to save the dollar” to “shock and awe 50bp cut we need” in a week. Please.

Regardless of the credit mess, as financial research analyst, I ALWAYS wanted to start a report: “Some half-assed piece of data comes out, the markets spasm, then you want to understand what the data really means.” As it was I got called unprofessional enough times for what I thought was banal statistical coverage. Amen Barry! Vive la margin of error on basis points deltas. ~mmw

I guess, KISS – keep it simple stupid, just doesn’t work when applied to the markets or the economy? (Oh, why do that! Economist would be able to disseminate more accurate statistics, “but no!”, the markets’ Heavy-Hitters wouldn’t be able to lead the sheep asray, which would therefore be putting less money into their pockets). But wait! they can always get Ben, to lower rates. Wow, what chicanery!

Like the idiom says “white lies, Lies and statistics”… Market is figuring it out. There is a huge disparity between buyers and sellers right now… Hence volatility… all these bottom tests aren’t buyers, it’s short covering, and scary.
Best Part.. No “Rate Cut” nonsense, without bad job numbers, or something… this is just a healthy sell off. Just some crying in their oatmeal. Wait till the bears suck some buyers in to get stopped out.

Cramer started this “rate cut” nonsense, but he just meant that if the fed cut in May, we would go to 16000… Because it would be starting to help now. But they didn’t. So now somehow the market thinks that we should be at 16000 because of the fed cut, and don’t realize “an ounce of prevention…..”
Don’t blame CNBC they are just journalists, and just feed us the lies the traders/brokers feed them. If it wasn’t for bad data they wouldn’t have any at all.

I think it’s going to be hard to get the bears off the meat today.
the NASDAQ is currently down more than the dow… again, I thought tech was working? I bet the whisper on Microsoft is weak.

I could be wrong, My crystal ball says we test the august lows, slight jump on the fed, trade neutral till we find a weakening consumer and bad jobs numbers. then we test march. Then 10-11K
Besides Higher P/E, Or trying to convince Retail investors to come in and “hold the bag”.. The market has nothing to hang it’s hat on.

How can tech work if the chips that make them work arn’t selling..

My take is that when homebuilders have stopped declaring bankruptcy for two straight quarters, then we have bottomed.

From the Chicago Tribune:

Neumann Homes, one of Chicago’s largest homebuilders, announced on Monday that it intends to file for bankruptcy.

The company said in a press release at 5 p.m. that it had been “unable to procure adequate funding” to operate its business. Marketing director Jean Neumann said that despite other published reports, the bankruptcy had not been filed, though “it will be done shortly.”

Too many of the numbers are massaged, spun, and processed by the media to make things look better that I prefer the actual bankruptcy filings as hard evidence.

To be honest, you are wasting your time talking about real estate troubles, subprime, CDOs and so on. Everyone knows about this by now and it’s already reflected in the market. That’s why brokers and banks are down sharply this year and trade at single digit PEs. You are also too focused on US economic problems, there’s a global boom under way and you’re missing it. The bearishness on this board is ridiculous.

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BR: Nicholas, if you think this is fully reflected in stock prices, than you probably believe that the Banks, Brokers, Mortgage Lenders, and Home Builders are screaming bargains.

You should go buy a boatload of shares in all of these!

Hey Nick, you don’t happen to be Santa Claus, do you? I’ll thank you for my (Teddy) Bear ahead of time!

David,

As much as a personal tragedy the CA fires are for those involved, in the context of an industry building ~700,000 homes in a really bad year, rebuilding 1,500 homes is a rounding error.

“New House Sales Triple in October”

According to the Census Bureau, Americans bought 3 new homes in October, up from the revised figure of one in September[down from the originally reported figure of 770,000]. Mr. Karl Bildenhausen, President of Better Homes by Bildenhausen, was responsible for all three sales. He was quoted as saying, “My dog Prince can be a very persuasive salesman.”

Anyone know that humor reference without resorting to Google? LOL

Keep up the war on bad statistics.

So if the average cancellation rate is say 40-50% for September (according tot he rates quoted in the post), does this mean the September number might be revised down to, say, 400k?

That would be… spicy.

“So if the average cancellation rate is say 40-50% for September (according tot he rates quoted in the post), does this mean the September number might be revised down to, say, 400k?

That would be… spicy.”

Apparently Jeff say you can’t say that.

He could be right though, this from the report itself:
“These statistics are estimated from sample surveys. They are subject to sampling variability as well as nonsampling error including bias and variance from response,
nonreporting, and undercoverage. Estimated average relative standard errors of the preliminary data are shown in the tables. Whenever a statement such as “2.5
percent (±3.2%) above” appears in the text, this indicates the range (-0.7 to +5.7 percent) in which the actual percent change is likely to have occurred. All ranges
given for percent changes are 90-percent confidence intervals and account only for sampling variability. If a range does not contain zero, the change is statistically
significant. If it does contain zero, the change is not statistically significant; that is, it is uncertain whether there was an increase or decrease. The same policies apply
to the confidence intervals for percent changes shown in the tables.”

http://www.census.gov/const/newressales.pdf

Frankie,

Aug Original 795,000
Sept Original 770,000

So “apple to apple” comparision will shows that rate of new home sales declined from Aug to Sept.

Only when you use Aug (downward revised) number of 735000, you get increase of 4.8% as mentioned in the headline. But in that case it is not apple to apple comparison. You need final (revised) number for sept.

To all of those with the fruit and mango stands:

Government data gets revised as information gets better (more people respond to the survey, for example). The final data series represents the revised data. This is important to those doing economic research, who need to know WHEN effects occurred.

Those interested in studying the market must be careful to relate market effects to the data known to the participants at the time, not the final revised version.

The right choice depends upon your purpose.

When the government is trying to show a monthly change, as they are in this series, it is important to use the most accurate data they have. That is the latest revision. As I noted in an earlier comment, to do otherwise would be misleading, so they do not do it.

There is no reason to expect that revisions will consistently be in a single direction, as Stuart suggests in his example. There is nothing that makes the unrevised data “an apple” except that it is less accurate than the later version.

I invite anyone to point out a professional time series with revisions that does not follow the process used by the BLS.

If anyone is actually interested in learning about this, you can look at the raw data at various government sites.

Let’s all try to do our best in interpreting data. Last month was worse than we thought at the time. This is not like a football game or something where we do something to this month to even the score.