Only two groups: The Media and Wall Street economists.
I’ll make this as simple as possible. (If you are a journalist that covers this area, please read and UNDERSTAND this).
The NAR release makes clear (in the footnotes) that the Pending Home Sales Index was a NEGATIVE REPORT. This was not a positive, despite what you may have read — or wrote — about this.
Here are 4 details you need to understand:
1. The Pending Home Sales Index is down 12.3% Y/Y.
As the NAR notes itself, it is the annual data, not the monthly number, that matters most.
2. 30-40% of these pending sales were distressed/foreclosure sales. Many of the ‘pendings’ are short sales — bought for much less than the amount owed on the mortgage. The majority of these will not get approved by either the seller (REO Bank) or the financer (mortgage originator).3. There is a growing gap between PHSI and actual closings (See NT chart below).
4. The monthly rise is nothing more than regular seasonality.
>
Look at the Pending Home Sales Index and Existing Homes Sales, we see that month-to-month sales gains in 7 out of the 8 cases DO NOT correlate with Existing Homes Sales gains two months later — most of the time, its been flat to negative.
Chart courtesy of Northern Trust
>
What is amazing is how many people got this wrong, either through ignorance or laziness.
Here is our media PHSI hall of shame:
Reuters: Housing lies at the heart of the economic problems, and the rise in the index of pending home sales, which is based on contracts signed in June, was a welcome bit of good news.
Marketwatch: In a sign that the U.S. housing market may strengthen in coming months,
an index of sales contracts on previously owned U.S. homes rose 5.3% in
June from the prior month, the National Association of Realtors
reported Thursday.Atlanta Journal-Constitution: A measurement of pending home sales rose in June in a rare piece of positive news for the beleaguered market.
FT.com: A forward-looking index of US home sales bounced back in June to its highest level since last October, offering some respite from gloomy data on the housing crisis… That was 12.3 per cent below the index’s reading in June 2007 but still marked a clear improvement over the small drop expected by most economists. A levelling-out in sales is considered a key first step towards recovery for the ailing US housing market, since it could lead to a lower supply of unsold homes and therefore contribute to a stabilisation in prices.
Thomson Reuters: "An index of future home sales rose in June to the highest level since October, a sign that buyers could be starting to dip their toes into a weak housing market, the National Association of Realtors (NAR) said today. The pending sales index is supposed to be a leading indicator for the housing market, based on contract signings that usually lead to actual sale closings in one or two months."
The Street.com: "This monthly rise, along with the expected effects of recently passed housing stimulus bill, suggest some improvement for upcoming existing-home sales. "With roughly 2.5 million first-time home buyers taking advantage of the temporary tax credit, existing-home sales are likely to rise 7.0 percent to 5.51 million in 2009 from an expected total of 5.15 million this year," the NAR reported."
Wrong, wrong, wrong.
Its not just the media that missed the facts here — some economists that should know better also screwed the pooch on this one:
Ian Shepherdson, chief U.S. economist at High Frequency Economics: "This is the second upside surprise in three months, so it is [hard] to ignore. We’re guessing, though the numbers offer no [breakdown], that sales of foreclosed homes are driving activity. We doubt sales of non-foreclosed homes are rising, given the recent rise in mortgage rates and continued price declines. [Still], anything which reduces inventory, whether of foreclosed [homes] or not, is a very welcome development. It does not fix the housing market, though, but it might be the beginning of the end of the crash."
Joel L. Naroff, chief economist of Commerce Bancorp: Foreclosure sales undoubtedly are a significant aspect of the improvement," "It is making lots of homes affordable to buyers who have the credit and money but not a lot of income." "Everything taken together, I believe we have bottomed when it comes to existing home sales," Naroff said.
Anyone get it right? Well, Bloomberg came pretty close:
Bloomberg: "The pending resales report is considered a leading indicator because it tracks contract signings. Closings, which typically occur a month or two later, are tallied in a separate report from the Realtors."
Not great, but better than most.
As mentioned yesterday, CNBC’s Diana Olick points to this chart (below) from HousingDoom.com, showing the difference between PHSI and actual closings. Diana gets credit for not buying into the breathless — and wrong — hype. Also, Housing Wire also had some good insights.
Of all the media I reviewed, Marketwatch’s Rex Nutting is the only person who got this right:
"It’s wise not to get too excited about this increase: These data are extremely volatile from month-to-month, and a big increase in the pending index doesn’t necessarily translate into a big increase in the existing-home sales in the next month.
Signing a contract to buy a home is not the same as actually buying it. Many sellers may be desperate to accept any bid, no matter how unlikely it will be that the buyer will get financing."
Rex was one sentence away from sheer perfection; I would have added this line: "The NAR notes that its the annual data, and not the monthly number, that correlates most to sales over the next two months."
The rest of the Media fulfilled the important function in a democracy and free market based economy of acting as stenographers for a trade group notorious for their spin. (Nicely done)
I find it amazing that so few people fail to read the footnotes or methodology of a fairly major Housing related release. Contemptible.
Well, no more. I have spent 6 months politely chiding journos that they are missing the actual facts of the release. That hasn’t worked — so I am now moving to embarrass people who are disserving the investing public. When honey the doesn’t work, its time to move to vinegar.
>
Previously:
Media Gets Pending Home Sales Wrong (Again!) (August 2008)
http://bigpicture.typepad.com/comments/2008/08/major-media-get.html
Revisiting Housing Seasonality & the Perennial Bottom Callers (July 2008) http://bigpicture.typepad.com/comments/2008/07/revisiting-seas.html
>
Sources:
Pending Home Sales Rise, Wider Gains Anticipated as Buyers tap Housing Provisions
NAR, August 07, 2008
http://www.realtor.org/press_room/news_releases/2008/pending_home_sales_rise
Pending Home Sales Index Moves Up, Will Actual Home Sales Advance?
Asha G. Bangalore
Northern Trust, August 7, 2008
Thank you for this!
It has been a pert peeve of mine forever.
The chart presented depicts pending home sales actually underestimating existing home sales for a given period. This cannot be accurate, is it? I recall a great chart yesterday, perhaps from Bloomberg, that showed how the PHSI actually overestimated actual sales by a large percentage.
Thanks BR, your a prince if not a priest. I mean that in the true sense of the word. Perhaps we should use some of these reporters and psydo-economist as offerings? lol
AJF,
Agreed…chart looks funny to me…are the legends reversed?
Thank YOU Barry. Please keep up the good work and call these people out by name. This nonsense needs to stop NOW.
Great Post. We need more analysis like this.
Give ’em hell, Barry!
Lofty goal… but I really don’t think you can embarrass those people. They’re too dumb to care.
Nice!
Come on BR. They did not get it wrong. It’s a conspiracy… Someone once said the “Wall street selling machine”…. these clowns are trying to dupe people to buy overvalued stocks….Luckily we have guys like you to hash this stuff out…. Did you ever see the Movie “V for Vendetta”. I hope the G-men don’t come after you the way they went after Osama’s driver…. I think they’re also trying his maid and plumber for similar crimes….
$$$$$ Sheik
Great work. Keep it up. Someone needs to call them on this stuff. I do it, but I only have an audience of one (my wife).
well Larry Kudlow had some professor from Columbia on last night and he posited that the housing crisis is over or never was….so who are we to believe Barry or a professor from Columbia….Barry present your creds…..
Please, someone tell Barry’s pal Kudlow. He was giddy over this garbage on his program last night.
Barry – you missed HousingWire, which got it right.
(“Pending Home Sales Paint Problematic Housing Picture,” 8/7/08)
Stop the presses…the story of the morning is…
EURO getting slaughtered…down almost .03!!!! This is a huge move. I posted last night that dollar broke above its 200 day and how this will likely erase the dollar’s boost to foreign earnings around year-end. Since market looks ahead 6 months, we may see a nasty tumble soon.
I know that anecdotal evidence can often be unrealiable, but I had a real estate agent here in Minneapolis tell me a couple of weeks ago that in her 21 years in the business, this is by far the worst she’s ever seen it. Didn’t get the impression from her (sounds like she was being brutally honest too) that things were improving AT ALL either.
Right on! I’d suggest listing reporters’ names and whether they majored in basket weaving or fingerpainting.
I find this fascinating BR. You are following the same path Joshua Micah Marshall did at TPM. Slowly being ‘radicalised’ by the constant refusal of so many (including those who should know better) to acknowledge simple truths.
God bless you.
Russia just invaded Georgia…oil should skyrocket, but dollar is surging. Markets are in utter chaos.
A perfect blog posting. Very insightful, thanks Barry. And by the way, I’ve noticed Rex Nutting is consistently excellent.
“I have a whole bag of “sh!” with your name on it.”
~Dr Evil
I was watching CNBC Europe last night (I’m a loser) and they believe that the US housing market is showings signs of recovery. Try to keep a straight face for once, we need to keep the euros flowing this way.
Heh.
The ‘journos’ are doing exactly what most of their readers do: reading the first 3 grafs and skipping the really IMPORTANT stuff near the end of the article/release.
BR,
Would you comment on the ‘rise in productivity’ that shills in MSM champion as a last bastion of hope, and a reason why the Fed needn’t raise rates anytime soon? I feel that along the lines of this PHSI report, the true story isn’t being told in these productivity bits. I know there’s a dark side to those numbers; would love to hear your opinion.
http://tinyurl.com/6m9ngq
“Reuters: Housing lies at the heart of the economic problems”
NOT
its Joe & Jane 6pack
its Bill & Brenda wineglass
looking for an income stream in the new age of global factories
BUT … I agree housing and its related business is big national business
THEN … address energy imbalance, negative to growth paper pushing, police’g the world for free
I don’t think this kind of thing is an accident. So why does the media love to regale us with mothers killing babies or husbands dissapearing wives but nothing on the bad news that LITERALLY affects the whole world?
Barry, I love you for fighting the good fight. But really, the thing to do is TAKE THEIR MONEY.
Next time some guest starts talking about how the worst is over, make a bet with them. Could be a $100 bucks, but I think it would be much more fun to bet 3 square inches of space on each other’s websites/newsletters saying, “I bet Barry that X meant Y was going to happen and I was dead wrong.”
~~~
BR: I’ve had fantasies about doing just that on TV.
I already have a bet with Jimmy P of USNWR on this
http://bigpicture.typepad.com/comments/2008/05/wanna-bet.html
having just watched CNBC on upgrading the national electric grid
I think what we as a business nation are waiting for is lower wages for the workers to do that work … so our economy is on an equal footing with the emerging world
that is the bottom bottom line … bringing the post WW2 worlds powerhouse (USA) down a few notches for future world growth
Honestly, i wonder why anyone pays any attention to this release at all. It comes just a couple weeks before the realtors’ data on actual sales. Are we so hungry for news that we need more irrelevant data?
It used to be amusing to look at the NAR’s monthly forecasts (which are part of this release) just to see how out of touch they are, but that’s lost its charm as well.
Then, if we can just get people to ignore the monthly housing starts data (plus or minus 12%!!!!!), we’ll be making some progress.
I have spent 6 months politely chiding journos that they are missing the actual facts of the release. That hasn’t worked — so I am now moving to embarrass people who are disserving the investing public.
Sounds like you’re headed down the same road that Dean Baker has with his Beat the Press blog. I welcome you along.
Brilliant, Barry. I think working with you would be one of the few things that I would leave my hedge fund for.
> either through ignorance or laziness.
They are a lot of things, but ignorant and lazy aren’t
two of them. You let them off easily for playing their
part in a fleecing operation.
You might want to check on your point about short sales distorting the picture. As I understand it, the NAR’s methodology defines a pending sale as one in which the seller has accepted the offer and the realtor has entered it into MLS as a pending sale. Most of the short sales that you contend correctly never close are only an offer, not an acceptance of the offer by the bank which owns the asset. Thus they should not show up in the pending sales numbers.
~~~
BR: Many Banks that are stuffed with REOs have jobbed out selling them to local Realty firms. Some of these gets entered into MLSI — but I do not have the figures.
Also, Home sales and pending home sales rising and prices falling is a bad thing. For every person who gets a ‘deal’, perhaps 100 people with similar homes in the area have their home value slashed, putting them into an even deeper negative equity position.
The PHSI report showing prices falling suggests a certain percentage pushed over the default cliff edge.
Regular reader of the blog. Kudos for telling the truths!
I am really astounded by the audacity with which people in the CNBC world seem to pull off bald faced lies. At the core of it I think it is an absolute lack of understanding of even the basics of mathematics and statistics which enables them to do this. Talk after all is cheap. Watching that stupid faced Dennis Kneale and Kudlow makes my blood boil. Someone should start a blog to call out on the lies that CNBC spouts day in and day out
Kindly allow me to draw your attention to recent evidence that the housing downturn will last much longer, even though many analysts and many in the media say we are near the bottom.
Very simply, the supply of new homes in the pipeline is nearly double current demand, even two years after the housing bubble began collapsing. Figures released today show that new home purchases fell to an annual rate of 530,000. A few weeks back, data on new home starts showed it running at an annual rate of 1,066,000.
Apparently most homebuilders, while cutting back somewhat, still expect high demand for their own new homes and/or are trying to increase market share, drive competitors out or whatever other animal spirit motivates them – even as they accumulate increasing losses.
One good sign of a housing bottom will be new housing starts running below new home sales, and doing so for several months.
Also, as you know, the recent bullish data about housing inventories coming down is suspect since many sellers have pulled homes from the market in hopes of getting a higher price in the near future. While this is clearly borne by anecdotal evidence, an analysis of housing sales and inventory data, over the past year or so, will likely reveal the overhang of excess inventory hiding in the shadows.
Agreed that the housing market is a disaster with no way to call a bottom.
BUT…
The NAR footnote does not invalidate the monthly figure as you say it does. It says not to use the 1mo figure to predict 12mo changes in sales [BR: NO IT DOESNT; SEE NEXT COMMENT] (of course you shouldn’t!). But it does not warn against using the 1mo figure to predict 1mo changes in sales.
Some day in the future, we will see that a few months of positive suprises in the monthly figure signalled the bottom WAY before the 12mo figures did.
Regarding seasonality, the percentage increase this July was larger than last July’s increase and in fact the prior two years did not show any rise in July. Even seasonally adjusted, this figure looks like a positive sign.
And this was a positive surprise as compared to consensus expectations of a 1% drop (which is seasonally adjusted).
My point: There’s no way to call this bad news. It was not even “no news”. It was positive news that nevertheless may be dashed by a disappointing number next month. Agreed?
Steve,
That is not what it says at all:
1) NAR footnote: “In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. THERE IS A CLOSER RELATIONSHIP BETWEEN ANNUAL INDEX CHANGES AND YEAR-AGO CHANGES IN SALES PERFORMANCE THAN WITH MONTH-TO-MONTH COMPARISONS.” (My emphasis)
Note that there is nothing in the definition discussing year ahead sales — only 1-2 months ahead.
2) There were 8 monthly increases in the PHSI over the past 3 years — each with annual decreases — and in 7 of the 8 cases, sales were lower 2 months later.
87.5%! That should be case closed for you.
3) What is the significant of either positive surprises or relative percentage changes?
If you want to quote either of those data points, then show me, or perform yourself, a study showing that this is a relevant data point, has a causal relationship to future sales performance, and is not merely coincidental.
Dude, you are reaching.
Fascinating! You followed the famous dictum to explain with a crayon.
Read an interesting note today at Inman News. “The best model for the crunch dates to January with Jan Hatzius (Goldman Sachs) and the Bank Credit Analyst with the same insight:
capital shortage means insufficient credit. Here’s the equation: system write-offs in the last year total about $500 billion, and only $350 billion in new capital has been raised. That $150-billion shortage, by the miracle of 12-to-1 bank leverage (and 25-to-1 broker-dealer and hedge-fund leverage) leads to a credit shortfall of at least $2 trillion. This shortage shows up as price-rationing: if you want to borrow, you have to pay a hefty spread over Treasurys or do without.”
Methinks you are too harsh on individuals having a difference of opinion than you. I thnk most of the reporting focused on the m-o-m because of the potential bottoming of the PHSI. If it stays above 85 by the Sept. report it will be positive y-o-y then according to your analysis we should be looking at positive y-o-y Sales. Also, 8 data points is not enough to reach any statistically significant conclusion – go back to stat 101. You bash the NAR endlessly, why use their modeling to defend your thesis?
~~~
BR: You thesis is wrong, as is your read of the methodology, and your stat work, too.
Statistics: By your own logic, look at the most recent data — Only 1 out of 8 most recent monthly PHSI increases led to a rise. 7 led to a fall.
How is 1 in the most recent 8 consistent with your views of PHSI or of statistics?
Methinks you are too harsh on individuals having a difference of opinion than you. I thnk most of the reporting focused on the m-o-m because of the potential bottoming of the PHSI. If it stays above 85 by the Sept. report it will be positive y-o-y then according to your analysis we should be looking at positive y-o-y Sales. Also, 8 data points is not enough to reach any statistically significant conclusion – go back to stat 101. You bash the NAR endlessly, why use their modeling to defend your thesis?
Posted by: anonymous | Aug 8, 2008 6:44:12 PM
First off, why the anonymous post? Secondly, MeThinks Barry is using the NAR to make a point because they are supposed to be the so-called “experts” (not industry cheerleaders and flacks) on the housing industry and have been so ridiculously wrong (and obviously biased) almost every step of the way over the past 1.5-2 years. What other data would you have him use?
Do my words change because of their anonymity? How do I know you are Jeff? Why should I care?
Using 8 data points to suggest some statistical significance is just plain wrong, regardless of the point being made. If BR is certain about his thesis of the correlation between PHSI and Sales he should have analyzed a longer time series of data to support it. As an example, assuming you were to model the above stated correlation using a normal distribution you would need at least 23 data points to achieve a mean error of ~20%. Just saying.
~~~
BR: You are wrong about the stats — we are only using the data SINCE THE REAL ESTATE MARKET PEAKED AND COLLAPSED.
In the 8 most recent data points (month over month increase) one of eight support your argument. 12.5%!
As to the anonymous post — yes, it does undercut your argument. Its cowardly, and it makes your lousy stat work look like the work of a troll.
Explain this mr Barry. seems like for every 100 PHS there is like 120 closings – this data even worth comparing? Seems like no matter how many PENDING sales you have MORE homes actually close. I dont get it.
[BR: PHSI isn’t a measure of actual sales, it is a measure of relative activity. Its an Index that uses 2001 as a standard “100” — not 100 closings. Capiche?]
Next isnt PHSI more an indicator of interest (contracts written for offer) and the actual the number closed (contracts accepted and closed) which is more an indicator of a banks willingness to do business? Seems like the percentage of actual closings are remaining constant.
[BR: No. It is an indicator of intent — but not actual — closings. The actual closings are released in the monthly Existing Home Sales data.]
Perhaps you could answer your question – what is PHSI??
By the way the trendlines for both numbers look pretty much flat whereas year over year they were not if you want to do the whole seasonality thing – I think you are sadly wrong about your analysis – either that or this is a poorly written piece cause I dont get it.
[BR: If you think that the trendlines above — they go from the upper left corner to the lower right corner — are flat, well, then sir, best of luck to you in the market!
PS: time for new glasses . . .
“either through ignorance or laziness.
They are a lot of things, but ignorant and lazy aren’t
two of them. You let them off easily for playing their
part in a fleecing operation.”
Posted by: KnotRP | Aug 8, 2008 12:19:33 PM
This is point that needs to be understood. We’re so nice, we’ve been so trusting, and, sadly, it has ill-behooved us.
One of the best things left to us by RWR(1981-1989) was the admonishment to remember: “Trust but Verify”.
BR: You are wrong about the stats — in the 8 most recent data points (month over month increase) one of eight support your argument. 12.5%!
#1 – I did not propose any thesis about the validity of the PHSI correlation to Sales. You did.
#2 – I just suggested your usage of statistics using 8 data points is flawed.
#3 – Saying something is wrong, even if it is your blog, does not make it wrong. Tell me why using 8 data points you can arrive at a statuistically valid conclusion.
~~~
BR: Let’s review: A positive M/M PHSI comes out. People rejoice! Pundits say this means exisiting home sales will rise next month.
Except they dont.
Since the housing collapse began 30 months or so ago, the correlation between positive M/M PHSI and subsequent sales is essentially worthless.
And you are arguing that despite its failing over the past 3 years the vast majority of the time, we should ignore the annual Y/Y for forecasting 30-60 day sales — a winning bet 88% of the time — and instead focus on the M/M number — a losing bet 88% of the time.
Let’s agree to disagree.
My best advice to you is that you should start speculating in Real Estate. You’d fit right in — you’re a natural!
“Tell me why using 8 data points you can arrive at a statistically valid conclusion.”
That was NOT the post’s point.
The key to Barry’s argument was that some asshats in the Media AND some, ahem, economists (who ought to know better) were way too keen in talking Pollyanna BS out of a data serie that indicates a reality that is anything but.
Whether or not that said serie is large enough to derive a statistically valid conclusion (and BTW, pray define what would that be) is not the kernel of the matter.
Tripping on the carpet’s flowers does not prove that the carpet has ceased to be flat.
As per Calculated Risk and the WSJ “existing home sales do track the PHSI pretty well”: http://calculatedrisk.blogspot.com/2008/06/why-pending-home-sales-are-negative-for.html
My point was that just because the NAR states this:
Correlation(PHSI-YoY, Sales-YoY) > Correlation(PHSI-MoM, Sales-MoM)
that doesn’t imply that Correlation(PHSI-MoM, Sales-MoM) is small. In fact, the 1st sentence of their statement says the correlation isn’t small (“parallels”).
Saying A is better than B doesn’t imply B is useless. You are misusing the NAR statement.
> 3) What is the significant of either positive surprises or relative percentage changes?
Your post argues that this was a negative report. But it is positive with respect to expectations and positive because it shows growth. It might be a fleeting positive data point but it is none-the-less still positive.
By your method of analysis, anything less than a 15% jump would be negative because of the headwind of 12 months of market decline. We’re trying to predict the future, not the past, aren’t we?
~~~
BR: Why are you making something so simple into something so complex?
Its easy: A NEGATIVE year-over-year number in the PHSI bodes poorly for the next few months relative to the prior year — even with a positive monthly.
Here is the NAR explanation: In the following two months . . . there is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons..
If you want to believe that a small monthly gain is better than a big annual drop, well have a good time!
> A NEGATIVE year-over-year number in the PHSI bodes poorly
Not true. For example, a -2% year-over-year PHSI this month would have implied a HUGE monthly gain and would be amazing news.
Why? Because it would have taken an 18% monthly rise to make up for the damage done last summer to the year-over-year numbers.
Between November 2007 and March 2008 the year-over-year PHSI was down 19% or more every month. And yet since the beginning of that period existing home sales never dropped more than 3% in any month.
My point? PHSI year-over-year cannot be used so simplistically as to imply it directly predicts sales levels.
I don’t know how other people use the index — I use it as a minor directional indicator. I never mentioned levels, and I don’t where you got that from.
When Y/Y sales are down it leads me to expect more softness over the next 30-60 days.
Between November 2007 and March 2008, the Y/ Y PHSI was down. And? Existing Home Sales were down also. Simple.
Here’s the formula: Y/Y negative = weak existing home sales.
Again, this is a very simple index from the NAR, and there is no need to make it more complex, or even teat it as if it were a seminal measure. Its not.
Your method compares year-over-year PHSI to month-over-month Sales. The NAR doesn’t endorse this relationship.
The NAR says there is a relationship between annual PHSI and annual Sales, not monthly Sales. [BR: Where do they say that?]
If we use NAR’s suggested methodology to predict July Sales we’d take last July’s sales and subtract 12.3% yielding 5.05M sales which is:
* A 3.9% monthly increase
* A sales level not seen since October
* The largest monthly increase in 31 months
This was positive news.
~~~
BR: Steve, tell you what — go back and recompute each PHSI over the past 30 months, and them see they should have forecasted.
Perhaps you have hit upon a new methodology — but its not remotely what the NAR’s is. As quoted above, Y/Y compares with next 2 months sales.
Best of luck to you with all of your real estate investments in the future!
The NAR algorithm as I’ve interpreted it has a 91% correlation with future sales levels.
Your interpretation has a 16% correlation to 1 month future sales and a minus 26% correlation 2 months ahead. That’s just noise.
> The NAR says there is a relationship between annual PHSI
> and annual Sales, not monthly Sales. [BR: Where do they say that?]
Sorry, wrong wording. I should have said: The NAR says there is a relationship between Y/Y PHSI and Y/Y Sales, not M/M Sales.
I have tried to be clear that I am not bullish on housing – I’m just trying to help clear up a misinterpretation of the data.
Sold to you.
#1 Let’s make this really, really simple: Using eight data points you cannot calculate any statistics with a reasonable error. Refresh yourself on intor to stat and you will immediatley see whare you went wrong, also you will understand the relevance of the numbers 23 and 20% referenced above.
#2 I have no opinion about the correlation between PHSI and Sales. You must have me mistaken for another poster.
#3 Try to be polite and stop demeaning people – it doesn’t make you any more right.
~~~
BR: Let’s review: A positive M/M PHSI comes out. People rejoice! Pundits say this means exisiting home sales will rise next month.
Except they dont.
Since the housing collapse began 30 months or so ago, the correlation between positive M/M PHSI and subsequent sales is essentially worthless.
And you are arguing that despite its failing over the past 3 years the vast majority of the time, we should ignore the annual Y/Y for forecasting 30-60 day sales — a winning bet 88% of the time — and instead focus on the M/M number — a losing bet 88% of the time.
Let’s agree to disagree.
My best advice to you is that you should start speculating in Real Estate. You’d fit right in — you’re a natural!
CALIFORNIA HOME SALES UP UN JULY
California Real Estate market gave signs of relief. Home sales went up 12.3 percent in July compare to the same month last year. According the Quick Data, a company that monitors Real Estate Activity nationwide.
Of the homes sold 44.8 percent were foreclosure resales.
The median home price last month was 318,000 down 3% from 328,000 for the month before and down 33.5 percent from July a year ago. Most of the drop in home prices is due to the depreciation properties are facing because of the mortgage meltdown.
Not even the most knowledgeable Real Estate indicators know exactly where the market is going. Foreclosure activity is at record levels, banks are asking for tougher requirements, non-owner occupied homes are almost impossible to re-finance.
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