Tuesday, November 29, 2005

New Home Sales Shoot Up?

The Commerce Department reported that:

Sales of new homes soared at a record pace in October in what could be a last hurrah for the booming housing market. The Commerce Department said that sales of new single-family homes shot up by 13 percent last month, the biggest one-month gain in more than 12 years."

"The increase confounded analysts who had been predicting that new home sales would decline by 1.8 percent. The rise in new home sales was accompanied by an increase in prices, with the median price increasing by 1.6 percent from September to $231,300 in October. ( Yahoo)
So what does this mean? Experts are 'confounded.'

One poster on The Housing Bubble Blog wrote "You, know I'm not totally convinced that this boom has completely run its course."

Another poster [ pchander100 ] wrote "I am very suspicious of the new home sales numbers. In California, new home builders are offering incentives to sell homes, while the inventory is piling-up. Yet today's numbers show a 49 percent increase. These numbers are rigged."

Ben Jones' had this to say "Keep in mind the incentives the HB's have been offering, like the Sacramento story yesterdayrevealed. Thesee guys have a lot of margin in their pricing so they can hold a fire sale."

There is a large degree of error to these commerce reports "This is 13.0 percent ( ±17.7%)* above the revised September rate of 1,260,000 and is 9.0 percent (±18.2%)* above the October 2004 estimate of 1,306,000." The "A 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 ( Commerce Department Report )"

Read little into this report. The 13 percentage increase likely reflects a large degree of error combined with increased incentives from homebuilders ( who have been 'taking away' sales from existing homes ).


  1. I wonder if the answer is that these numbers are just outright wrong.

  2. The numbers are certainly suspicious, given all of the previous alterations. According to today's "Briefing.com" report, new home prices for October are 0.9% higher than last October. That information can be found at: New Home Sales

    If the annual rate of price increase of New Homes sold declines from 7.6% to 0.9% in 1 month (from September to October), the actual monthly price increase over the last month is approaching 0. Though new home sales did increase, existing home sales decreased even more. The annual rate of existing home sales declined by 210,000, while new home sales increased by 164,000. This is a decline of 46,000 in the annual rate of total home sales.