New Home Sales Rebound! (Sales drop 23.5%; Prices fell 13%)

Yesterday morning, Commerce released the New Residential Sales data.

Encouragingly, the media has caught on to the monthly nonsense built into the way numbers get reported, as evidenced by this WSJ headline:  New-Home Sales Post Modest Gain Because Prior Months Revised Down

As we noted same time last month on "No, New Homes Sales DID NOT Rise . . .", the game is to report the present UNREVISED latest data versus the revised lower last month’s data.

Example: September 2007 sales of new one-family houses were initially reported at 770,000, up 4.8% from the prior months downward revision of 735,000.

As we warned, that phantom 4.8% gain was likely to disappear when the revisions get reported: Surprise! September got revised down to 716,000 — that swung the monthly numbers to a loss of 2.6%. Not very astonishing — all you need to do is read the data and do the math.

For the latest month of data, we see the same pattern emerge:

– The year-over-year change from October 2006 is minus 23.5%; (The statistically significant margin of error was ±10.3%).

– The median sales price of new houses sold in
October 2007 dropped 13% to
$217,800 — a significant drop from October 2006 price of $250,400;
(average sales price dropped exactly $1,000 o $305,800). Monthg to
month, prices fell

– Initial number of for new one-family houses sold October 2007 was 728,000 — this will likely be revised downwards, also winging it to a loss.

– The fractional initial unrevised gain of 1.7% has a margin of error of ±11.0%, and therefore is not statistically significant.

– Inventory improved, falling 6.7%, representing an 8.5 month supply at the current sales rate.

NOTE: New Home Sales are a measure of contract signings, and do not reflect cancellation rates, which remain significantly elevated in the 20-40% range.


While Homebuilders have been doing what they can to cut inventory levels, the problem they face is competition from existing
homes for sale — which make up more than 80% of total Homes for sale inventory.

Chart courtesy of Barron’s and Econoday


Commerce Dept, Novermber 29, 2007

New-Home Sales Post Modest Gain Because Prior Months Revised Down
WSJ, November 29, 2007 10:27 a.m.

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What's been said:

Discussions found on the web:
  1. Eric Davis commented on Nov 30

    Nice…. Keep the sane numbers comming,

  2. Stuart commented on Nov 30

    excellent post. You’ve posted about lazy headline writers. I think we need a new category of headline writers.

  3. Winston Munn commented on Nov 30

    Looks like the Bad News Bulls are going to get to play in the Astrodome, after all, with the crowd screaming, “Cut those rates! Cut those rates!”

  4. mhm commented on Nov 30

    Banks, U.S. near deal to freeze subprime rates: report

    The newspaper said the coalition and the government have largely agreed to extend the lower introductory rate on mortgages for certain borrowers who will have trouble making payments when their mortgages increase.

    There is your year end bull run…

  5. Eric Davis commented on Nov 30

    I know you don’t do investment advice…

    Any ideas on how to go “Long” the Printing of the Dollar?
    Is there a public company that does the printing?
    Or a company that provides the paper, or ink?

    I think this is going to be big business in the future… Assuming they negotiate their pay in EURO or Gold.


    Though I gave Barry Grief….
    NICE Bottom pick this week!!!! It’s better to be a little early than late…

    This bull run will end, sometime between now and the new year.. and we will have cooked in a good point and a half of fed cuts.

    It will be interesting to hear that empty “Click” of that fed gun, some time next year.

    May as well spend It while you have it. This philosophy works so well for the consumer, why not the FED.

    Maybe the ECB or Asia, can Credit us with some additional rate cut bullets…..

    Economics is fun!

  6. Stuart commented on Nov 30

    ok, so if they freeze rates, who picks up the difference? There are contractual rates at the other end for all those that were securitized.

  7. Stuart commented on Nov 30

    Below from this morning’s Daily Pfennig.

    Yesterday, my long time friend and colleague again, Ed Bonawitz was telling me that he had heard an interview on the BBC talking about the mortgage losses… And that the losses that the Lenders have been reporting are the mortgages they are stuck with… They’ve sent a ton of them to the “insurers” for collection… AMBAC is a bond insurer, and there are others… But think about that for a minute…. The Bond Insurers are the next shoe to drop… They will be the next to begin announcing huge write-downs… Oh, brother! ”

    50 bps easy….not that it’ll matter much.

  8. michael schumacher commented on Nov 30

    Two well placed Fed officials jaw boning the market about rate cuts. One on Tuesday….one on Thursday.

    So much for NOT influencing the market (which BTW is in it’s own charter)

    UBS possibly insolvent until 2015 but let’s take the market up on the folly of rate cuts.


  9. michael schumacher commented on Nov 30

    BTW that “plan” to freeze mortgage rates??

    Some “plan”…lenders have already been turning those resetting loans into Neg. Am. ones. The gov’t has NOTHING TO DO WITH IT AS it has already been done.

    In it’s infinite wisdom (on a friday no less) all it’s doing is making a statement about something that is ALREADY occurring. Nermind that it is yet another band-aid….how much distressed profit will GS report so it can send the market up again.


  10. kelso commented on Nov 30

    **off topic**

    MS, do you have your own blog? I am just a reader and find some of your comments interesting. If they were backed up with some analysis somewhere, sign me up.

  11. michael schumacher commented on Nov 30

    the world has enough bloggers.

    here;s the UBS story…

    I sort of assume that people are actually informed…one of the reasons I do not link (all the time) because most of what I post is widely available.

    And here’s the latest installment of oversubscribe the repo.

    This is not funny anymore….taking a market up for no other reason than capital and dreams…..


  12. Steve Barry commented on Nov 30

    Has Larry Kudlow completely lost it? Yesterday on his show, he said that the a worsening credit cruch warranted an emergency 50 bp Fed cut. On the same show he said the S&P was doing well this year. Today, hosting the morning show, Dick Bove astonishngly said there was no credit crunch and Larry did not question him on it. Further, Mr. Free Market Capitalism called on Paulsen to team up with Bernanke and after the rate cut, intervene to prop up the dollar.

    He said the Dow would be up 350 today, as he begged for rate cuts. I’m betting otherwise.

  13. Steve Barry commented on Nov 30

    QQQQ volume was huge on the downside from late July to Aug 16. During the phony 2 month bounce, volume was pathetic. As soon as volume picked up again, down went QQQQ. The short interest on top QQQQ stocks GOOG, AAPL, MSFT, CSCO and INTC is NONEXISTENT. There is no fuel for short squeezes. Time to short QQQQ?

  14. michael schumacher commented on Nov 30

    volumes have been pathetic all year with the rare exception of the artificially induced jaw boning of the Fed (or some other gov’t sponsored news event) Look back over the last year at the DJIA and it’s largest gains have been on the back of well placed “news” or other commerce department related news “items”


  15. michael schumacher commented on Nov 30


    What they Don’t tell you is that the amount it adjusts downwards is added on to the back end in the form of a Neg. Am loan. (which is sort of what got alot of people in this problem to begin with)

    Coalition….that’s a good one…just like the coalition in Iraq

    It is yet another band-aid masquerading as “help”.


  16. Dave commented on Nov 30

    While you include in your negativity the fall in the price of housing how about the offsetting effect of cheaper housing for the buyers (especially new buyers)and the extra cash they will have after purchasing?


    BR: Dave, I don’t have any clue as to how to answer your charges of negativity.

    The facts are that Sales have dropped 23.5% and Prices have fallen 13%.

    Do what you wish with this information — or totally disregard it — but please, let’s not pretend this is a “negative opinion” — Its data, plain and simple.

  17. michael schumacher commented on Nov 30

    how are those “new buyers” going to qualify??

    unless they have a pile of cash to put up then there is no offset per se. Those same buyers would have had no money down and likely have less than quality credit and still got a rate cheaper than today.


  18. VJ commented on Nov 30


    Has Larry Kudlow completely lost it?

    Better question is, has Kudlow ever completely had it ?

  19. Al Czervik commented on Nov 30

    I’d like to think that if the MSM headlines become more realistic, it’s because people like yourself keep reaming them about their sloppiness. Keep up the good work.

  20. Francois Theberge commented on Dec 1

    SIVs are like SUVs: consume lots of energy and give poor mileage.


  21. Jack B commented on Dec 2

    SIVs are like SUVs: likely to roll over in an emergency

    Jack B

  22. Winston Munn commented on Dec 2

    SIVs are like SUVs: overrated for safety in a crash.

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