Tuesday, May 17, 2011

Spin vs. reality

The Wall Street Journal reports:
U.S. home builders’ confidence remained stuck at an extremely low level in May as the battered housing market continues limping toward recovery.

The National Association of Home Builders trade group said Monday its closely watched housing-market index was unchanged at 16 this month as expectations for single-family sales over the next six months fell, while traffic from potential buyers and current sales inched up. The index has been at that level for six of the last seven months. Readings at 50 and above indicate a positive view of the market. (The most recent time the home builders’ confidence gauge hit positive territory—that is, 50 or better—was April 2006. The latest 16 reading must mean that builders are pretty down.)

Builders continue fretting about bargain-priced competition from foreclosures and other distressed properties, as well as proposals to scale back government support for housing. Many consumers remain on the sidelines, afraid that home prices have further to fall. Meanwhile, many would-be buyers can’t qualify for a loan.
Regarding the California housing market, they write:
Sales of single-family homes and condominiums were down last month by 3.3% from March and by 6.1% from one year ago, when sales were artificially boosted by federal tax credits, according to a report Monday from DataQuick, a real-estate research firm. Southern California had its worst April in three years.
And CNN Money reports:
New home construction tumbled in April, the government said Tuesday, as the nation's housing market remains weak.

Housing starts, the number of new homes being built, fell 10.6% in April to an annual rate of 523,000 units, down from a revised 585,000 in March, the Commerce Department said.
How did the National Association of Realtors spin the current state of the housing market?
Housing and Economic Forecast Points to Rising Activity
Realtors® Urged to "Seize the Day"
Over the past five years, I have repeatedly noticed that we don't get positive spin from the home builders, just from the Realtors.


  1. 'Over the past five years, I have repeatedly noticed that we don't get positive spin from the home builders, just from the Realtors.'

    very interesting.  I wonder why that is the case?  They both have an incentive to lie in order to sell more houses.  Could it be that the builders are just more ethical?

  2. I don't have an explanation for it. You're right that they both have an incentive to lie. I doubt individual realtors are less ethical than individual builders. It does seem that the economists who work for NAR understand their jobs to be primarily sales jobs, while the economists who work for NAHB primarily understand their jobs to be economist jobs.

    I've also noticed that the CEOs of home builders are usually blunt about the state of the market. At the same time, the junk snail mail I get from home builders tends to lack the same honesty. It's always typical sales material.