The following articles tell a tale of two housing markets. Reuters is reporting good news as new homes sales rose 1.3% in October. The report speculates that this can be seen as a bottoming out of the housing market. The second article outlines a different picture as the price of new homes has lost all gains since 2003. The graph below shows the sales of new homes in a different way than what is being reported:
I would like to also propose that this same manipulation of data by the media is responsible for the “rally” today on Wall Street.
David DeGerolamo
New home sales rise 1.3 percent in October
New single-family home sales rose in October and the supply of homes on the market fell to its lowest level since April of last year, showing some healing in the battered housing sector.
The Commerce Department on Monday said that sales edged up 1.3 percent to a seasonally adjusted 307,000-unit annual rate, which was the fastest pace in five months yet still below analysts’ expectations.
The supply of new homes in the market would last 6.3 months at the current pace of sales.
The data fueled hopes the market for homes could at least be bottoming out following the previous decade’s boom and bust in the housing sector.
“This looks like a bottom. The market is stabilizing,” said Gregory Miller, an economist at Suntrust Bank in Atlanta.
Average New House Price Drops To Lowest Since 2003
Today’s new annualized home sales print was 307k, below expectations of 315k (yet oddly better than last month’s downward revised which moved from 313k to 303k, wink wink nudge nudgeCensus bureau). This is not to be confused with the actual number of houses sold which came at a whopping 25k, and the third month in a row in which under 500 homes sold in the over $750,000 category. Yet the most notable data point was the average new house sale price which dropped to $242,300. This is the lowest price since 2003! Something tells us that an MBS LSAP is pretty much guaranteed at this point.
