New One Family Home Sales: Ugly!

New Single Family Homes Sold in USC25_curr
Source: Census Dept.

The Census Department released their New Home Sales data, and it warn’t none too purty:  Sales of new one-family houses in November 2007 fell to a 12-year monthly low. The  seasonally adjusted annual sales rate was 647,000, far below the consensus of 720,000. As expected, October sales were revised downwards. 

This is down 9% from October’s levels. Year over year, November ’07 new-home sales were 34.4% lower than November 2006. That’s the largest year-to-year decline since 35.3% in
January 1991.

New Home Sales are a measure of contract signings, and do not reflect canceled contracts. Actual numbers are likely lower, as cancellation rates have been running as high as 40%.

The WSJ noted that "the median price of a new home decreased by 0.4% to $239,100 in
November from $240,100 in November 2006. The average price advanced by
0.5% to $293,300 from $291,800 a year earlier. In October this year,
the median price was $229,500 and the average was $307,900."

Of course, these reported prices don’t reflect the
REAL price, as homebuilder incentives and giveaways do not show in this data. Builders have been throwing in free granite counter tops, high end appliances, swimming pools, even cars as incentives.

The inventory estimates of new houses for sale at the end of November decreased 1.8% to 505,000 — but because sales dropped even faster, inventory of unsold homes jumped to 9.3 months at the current sales rate.

Margin of error/confidence interval

One Final note: The monthly drop of 9.0% is below the Census Bureau’s ±13.9%* confidence interval. When the reported data point includes zero (as it does in this instance), then the Census Bureau states "it does not have sufficient statistical evidence to conclude that the actual change is different from zero." In other words, the monthly data is not meaningful.

As to the year-over-year change of 34.4%, the confidence interval of ±7.9% does not includes zero. Therefore (in Census Bureau lingo), there is sufficient statistical evidence to conclude that an actual change occurred.


U.S. Census Bureau and the Department of Housing and Urban Development.
FRIDAY, DECEMBER 28, 2007 AT 10:00 A.M. EST

Chart, New Single Family Home Sales
U.S. Census Bureau

Sales of New Homes in U.S. Dropped 9% to 12-Year Low
Bob Willis
Bloomberg, December 28, 2007

New-Home Sales Tumbled 9% Amid Falling Prices in November
WSJ, December 28, 2007 10:20 a.m.

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What's been said:

Discussions found on the web:
  1. Pool Shark commented on Dec 28

    Here’s a fun little article at CNNMoney where the author expresses incredulity that the ‘experts’ (including Greenspan and Benranke) who predicted a housing recovery for 2007 could have been so wrong:

    /a case of the blind leading the blindfolded

  2. KP commented on Dec 28

    New homes “sales” are becoming more ridiculous ly over-incentivized than your favorite local furniture store.

    Ruh Roh

  3. michael schumacher commented on Dec 28

    don’t forget that they count it as a sale even if the contract is canceled. Another neat little trick…


  4. Michael Donnelly commented on Dec 28

    Nobody pays any attention to the past revisions. So leave home sales at 728k in October and take out all the revisions in November. That brings November sales to 597k, a 18% month over month drop. OUCH!

    New sales from peak to bottom have already surpassed what we’ve seen in the 2001, 1990 and 1974 recessions.

    PS Home prices were up in November, and home builders paid deeply for it.

  5. GRG commented on Dec 28

    The economy is better than ever, don’t listen to anyone here … it’s the media’s fault for hurting consumer’s confidence.

    look – the stock market is starting to close in on the summer record. Everything is just fine.

  6. John commented on Dec 28

    Barry knows. Go ask the title guys what sales are. My buddy paints a more dire picture.

  7. Eric Davis commented on Dec 28

    next couple months we will see some positive movement, and the fools will jump in with both feet. I’ll have to think about betting some homies for a trade next month.

  8. Johnny Vee commented on Dec 28

    Look for the Fed to continue cutting without regard for inflation or the falling dollar-hey its election year inflation time anyway.

  9. Christopher Laudani commented on Dec 28

    With the sharp drop off in home values, looks like Americans biggest asset is now anything they paid cash for – like old magazines, stale hamburger buns and forgotten toys in the basement!

  10. Eric Davis commented on Dec 28

    Don’t we get the big crop report soon, I’m looking to make a big bet against FCOJ.

  11. KP commented on Dec 28

    Speaking of Trading Places….I wonder who will be stuck wearing the monkey suit this New Years Eve….Looks to be the tax payers.

  12. Eric Davis commented on Dec 28

    Everyone but the banks will wear that monkey suit,

    First on CNBC:
    “markets holding steady despite housing data”

    I wonder what charts they are looking at, cause mine are strongly from the upper left to lower right, with a 100 point drop since then….

    but I’m just a stickler for accuracy

  13. jake commented on Dec 28

    dont shake hands with bank of america employees…they dont wash their

  14. michael schumacher commented on Dec 28

    a hundred and thirty point reversal (well almost) is hardly “holding steady” but that is what passes for objectivity in our “financially based” economy….

    Tax selling today…..


  15. Richard commented on Dec 28

    i’ll be lucky to eek out a 4% return this year, meanwhile the rigged game that is wall street gets double digit increases in their bonuses this year. when are these guys going to swing from a rope?

  16. That Guy Drinks Beer commented on Dec 28

    “With the sharp drop off in home values, looks like Americans biggest asset is now anything they paid cash for – like old magazines, stale hamburger buns and forgotten toys in the basement!”

    Or their 401Ks…

  17. NC Jim commented on Dec 28

    17.9% and 7.9% confidence limits (+-) is way too big for meaningful analysis. The way you tighten the band is to expand the sample size. That costs money that is unlikely to be provided by an anti-government administration but hopefully will be provided in future.


  18. VJ commented on Dec 29

    From the “YOU AIN’T SEEN NUTHIN’ YET” department:

    Erika Miller, Nightly Business Report correspondent:

    * If you think housing was weak this year, brace yourself for next year. Many industry experts think we’re only half way through the housing downturn.

    * Experts say some previously sizzling markets like Florida could suffer double digit drops next year.

    * Economists expect foreclosures to increase as much as 33 percent nationwide, adding to the housing supply. Lenders have also tightened mortgage requirements in response to the sub-prime crisis. That means a smaller pool of qualified home buyers.

  19. halbhh commented on Dec 29

    BriefRant: Correct Useage of “Weak” (contrast to incorrect useage here re retail sales):

    “Sales of new homes fell an unexpectedly sharp 9% in November, while small gains reported for the previous two months were largely erased by downward revisions.

    “The magnitude of the decline, reported by the Commerce Department, surprised economists. Based on earlier sales data, some had hoped that the housing market might be beginning to stabilize. Joshua Shapiro, chief U.S. economist at research firm MFR Inc. in New York, called yesterday’s report “stunningly weak.”

    Note here “weak” means a meaningful *decline* (like more than -0.5%!).

    Comprende??? Not so hard.

    “Weak” means significantly *less* sales, not flat sales!! I hope posting the correct useage about 5 more times will be enough for me, lest I become stuck on this too long.



    BR: Are you saying that a month-to-month
    decline of 9%, and a year-over-year drop of 34.4% is not a meaningful decline?

  20. getting older commented on Dec 29

    Actually, the decline in new home sales is beautiful. Residential housing is just about the least productive use of capital that would be much better spent on R&D or infrastructure. People have been fooled into thinking that buying a house is an “investment”-it is not, it is a consumer purchase. We now have a golden opportunity to channel much of the money away from buying and selling houses and into curing diseases, finding new energy technologies or other more useful pursuits.

  21. VJ commented on Dec 29

    That could be a tough slog given that all the major stock market indices are down by about 20% from where they were in 2000 in inflation-adjusted dollars.

    Where’s the incentive to invest to come from ? Lowering the Cap Gains and dividend taxes sure didn’t work. It merely transformed the super-rich into the uber-rich.

  22. Shawpiro commented on Dec 29

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  23. halbhh commented on Dec 30

    Re what’s “weak”, sorry if unclear. Real retail sales yoy close to flat isn’t “weak” I mean. But in contrast new homes are certainly “weak” and even worse. “Weak” should refer to a clear decrease, and not near flat.

    Correct for retail sales:
    “Retail sales gain weak”

    “Retail sales weak”


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