Wednesday, April 26, 2006

Media Headlines Misleading on New Home Sales Data

Here are some of the headlines put out by the media on today's US Census Bureau New Home Sales Numbers [pdf]:

Very Positive Headlines on New Home Sales Data:
Mixed Headlines on New Home Sales Data :
Negative Headlines on New Home Sales Data:
Did the headlines in the media properly reflect the significant information from the new home sale report?

The headlines by the media failed to capture the main points of the new home sales report. Here is why:
  • Sure, seasonally adjusted new home sales increased by 13.8 from February 06. However, this was still down 7% from March 2005.
  • "The median new home price slipped 2.2 percent from a year earlier to $224,200, the first year-over-year decline since December 2003, the Commerce Department said"
  • "The 555,000 units of inventory is another all time record for new houses for sale. On a months of supply basis, inventory is significantly above the level of recent years." [Calculated Risk]. Up 25% from March 2005 when inventory was 441,000.
A much fairer headline could read 'March New Home Sales Data Mixed'. The media should be ashamed of their headlines regarding the new homes sales data. It is misleading.

The real news is that the year over year (YoY) numbers for both the number of sales and median sales price declined. Additionally, inventory of unsold new homes increased 25% YoY from March 2005.

All, this leaves aside the whole question of the value of the initial housing numbers from the Census Bureau as they have large amounts of uncertainty which the Census Bureau readily admits. The revised are much more trustworthy.

Housing Panic also takes the media to task


  1. The month may have been lower than the same month a year ago, but if the quarter is up year over year, does it matter?

  2. The quarter over quarter is down as well.

  3. They should be ashamed... but they're not.

    Does anyone ever wonder what the draw is to even be a journalist with the main stream media these days?

    1. you don't get to speak your mind

    2. speaking the truth isn't really encouraged either

    3. the pay is terrible

    4. tell me the name of the last real investigative journalist?

    5. Where are the heirs to Woodward and Bernstein?

    6. The news is more like just press release regurgitation- taking dictation from the talking heads

    What is the draw to being a mainstream media journalist?

  4. David-

    According to our charts, quarter over quarter and this quarter over the same quarter last year are both up for average and median prices.

    Not trying to argue, just shed some light.

  5. Unfortunately, most news stories simply regurgitate what the original source is trying to convey. In this case, NAR is promoting the increase in sales, so most journalists do the same. I'm not saying it's right, but some journalists simply cannot interpret this information properly.

    Due to the misleading articles today, I decided to use the opportunity to short Toll Brothers stock. Most homebuilders were up 2-4% today. I expect the quarterly results for homebuilders, especially luxury homebuilders like Toll Brothers, will tell a less positive story.

  6. after hours trading showed most of the builders taking a tumble... reuters just popped up with that.

    So I agree... mainstream media is just regurgitation. Has been for a long time... so why would anyone who really felt themselves to be a journalist want to work there?

    I mean who hasn't noticed the lack of any journalistic qualities of the media?

  7. I think part of the issue is this obsession with instant news, and monthly (or weekly in some cases) data. The sample sizes are way too small to mean anything. So, they see a number jump month over.. big deal. The last month could have been in the tank, and the jump would mean nothing.

    You really have to a) have decent sample sizes, and b) look at things over a long enough time to know what "normal" is and what the trend is..

  8. bubbleveric,

    when I said "The quarter over quarter is down as well."

    I really meant YoY, comparing 1Q 2006 with 1Q 2005, sales and median price is down. My mistake.

  9. I don't get you all. When sales jumped in January 06 (when compared to Jan. 05 and Dec 05), you all dismissed it by saying, "Oh, the bubble is still bursting. January was unseasonably warm." Now this. You can't have it both ways.

  10. awaiting bubble rubbleApril 27, 2006 2:50 AM

    "Sure, seasonally adjusted new home sales increased by 13.8 from February 06."

    Actually if you read the version at

    you get to this little gem:

    "While sales were reported up nearly 14%, the margin of error was 15%"

    Ummm... the appropriate headline would be "Home sales MAY have been up". As a previous poster pointed out, the sample was too small and the margin of error was so large that sales may have not been up at all... We just don't know!

  11. I believe the word is PWN3D? When are you idiots going to even consider the possibility that you are wrong, that you never knew what the housing market was going to do, that you're not economists, nor do you have extrasensory perception, and that all you really are are homeowner-haters who resent people who have been able to build up equity, seemingly without effort?

    I do hope that a year from now, 2 years from now, 3 years from now, when the housing market has clearly continued HEALTHY growth - not the breakneck growth of the last few years, mind you, but healthy growth - that you will have the decency to admit you were wrong and to apologize for hoping that decent homeowners lose their shirts.

  12. Dear Anonymous Housing Head Coward,

    Do you have a clue? Can you explain why housing selling prices increased by 50-150 percent in many metropolitan areas while incomes have only grown 5-10 percent on average? Sure, there is demand for housing. However, the demand and the basic economic situations of households do not justify the irrational run-up in housing prices. That's called a bubble. I think bubbles exhibit criminal human behavior.

    Home Owners
    Real Estate Agencies
    Mortgage Lending Companies
    Tax Asssessment Bureaus with Local Governments

    All guilty of building this bubble that hurts lower income families and causes this country to fall deeper into debt. Does it make you sleep well that China is financing our balooning home mortgages??? Criminals don't care about their community or country. Those groups named above are guilty as charged.

  13. ihateyuppies,

    Sorry you hate yuppies, but we can and do easily afford even the increased prices in DC housing. The fact that you can't doesn't mean the market is going to come down. It means you have to move to Western Maryland.

    Have a nice day.

  14. Anonymous
    and that all you really are are homeowner-haters who resent people who have been able to build up equity, seemingly without effort?

    It's foolish to group us participants and Mr. Bubblemeter as homeowner haters. I can't speak for others but my take on this bubble is an outrage that housing is becoming out of reach for most people. Also I feel bad for the homeowners who have to pay increased property tax on artificially highy property values. I also feel bad for the share holders of the lending institutions who made risky if not stupid loans.

  15. Aaaah, that's OK Anonymous. Washington, DC is an over-priced dump filled ego-maniacs and superficial yuppies just like you.

    I plan on heading back to the Midwest where people have a personality and housing prices won't put me in debtors hell.

    Later Gator and have fun paying your obscene mortgage and sky-high taxes here!

  16. Hey anonymous, I'm a "yuppie," can afford a home here in the NY area, and I still hate yuppies. Particularly ones with attitudes like yours. That will get you really far.

  17. Anonymous,

    You may be a troll, so I respond only hesitantly. My concern about housing prices in the DC area (and elsewhere) has little to do with yuppie-bashing or envy; after all, I am a professional who owns a home in Alexandria, VA with substantial appreciation.

    Rather, my concern is that our country is overinvesting in real estate, with the encouragement of Congress (through the tax code) and an accommodative Fed. Debt-driven asset inflation is NOT a healthy or feasible means of achieving long term growth for our country. A house is not a productive asset, unlike a factory. By spending such a large portion of their incomes on mortgage payments, average Americans have little ability to save and invest to create capital for more productive areas of our economy. Hence, we rely upon China and Japan for that capital.

    Besides, increasing inventory, increasing carrying costs, and the disconnect between purchase prices and rents should tell you all you need to know about where the market is headed. It's not a matter of "if" housing prices will decrease, it's a matter of when and by what degree.

  18. "Besides, increasing inventory, increasing carrying costs, and the disconnect between purchase prices and rents should tell you all you need to know about where the market is headed"

    Now, why doesn't it tell you that rents are going to rise? Since, I assume, an intelligent guy like you would never in a million years assume his conclusion.

  19. I think those who were lucky to have bought before the greed set may not get what is happening.

    The housing issue has made it impossible even for those who have good jobs and make good money to buy a home.

    I mean who really can afford a 500K house besides those who have a large downpayment or those who take on risky I/O loans?

    If there is no bubble and if these prices dont come down and if it is true that interest rates will only rise ....

    I believe the bubble is real and that it is in the middle of hissing as it springs a leak ... the flippers are out and the rest of us can't afford to buy.

  20. "I mean who really can afford a 500K house besides those who have a large downpayment or those who take on risky I/O loans? "

    Maybe my perspective is screwed up, but an upper-middle income family shouldn't have a problem.

  21. Let's not forget that the US savings rate is lower than it has been for decades. Just because you can "afford" the mortgage (which really just means that the bank said you could) does not mean you should own. Owning a home does not garuntee security. How much are the "upper middle" folks easily paying for their 500K+ mortage saving for retirement?

  22. Anonymous 11:55,

    Alas, you recognize that I could be entirely wrong, and that rents could rise in the future to meet recent price increases. Do you therefore agree that there is a disconnect between prices and rents? If so, could you please paint us the picture whereby rents could increase to meet the recent increases in prices?

    Given the current level of ever-inreasing inventory, the number of condos coming on line in DC over the next year, I just don't see rents increasing by all that much. I see plenty of flippers desparately becomming landlords to mitigage their losses, which will put downward pressure on rents. I'm open to rethinking my position regarding future price increases, so perhaps you can enlighten me.

  23. My household income is currently about 115K a year and I have modest recurring bills (a car and student loan). Am I considered middle class? I have no idea. Anyway, I really can't find a decent house for under 550,000 where I live and to be honest, we cannot afford that price without going on a lettuce diet. I'm no real estate expert, but there is something inherantly wrong with that picture.

  24. "Maybe my perspective is screwed up, but an upper-middle income family shouldn't have a problem."

    maybe my perspective is screwed up, shouldnt a median household be able to afford a median home? seems a shame that an upper-middle income family can only afford a lower middle home. rich getting richer...poor getting poorer. eventually, this leads to revolution. feel sorry for your kids and grandkids...