I hate to sound like a bubblehead trying to poke holes in statistics that don't meet his preconceived notions, but there really seems to be some disconnect here. According to these stats, inventory has been falling for 4 months, median prices have been generally rising and sales have held essentially steady for six months.
This doesn't seem to jive with the builders' own reporting, and flies in the face of boatloads of (admittedly anecdotal) evidence.
...and, worse still, it doesn't fit my preconceived notions!
As CR writes, the inventory figures do not include cancellations; when a home is "sold" it's subtracted from the inventory, but it's not added back if the sale falls through before closing.
Median prices are being deceiving because of the many incentives being offered, and reflect the amounts that people are willing to spend rather than builder success in getting prices with high margins. As mortgage rates haven't risen, a buyer who could spend $500k a year ago can and will still do so today, but today they get a home that would have sold for much more a year ago.
And those incentives not only help (improve the appearance of)[and if you look good, you feel good and if you feel good, you are good to go so get out there and be gone] the sales volume, but like the auto incentives, the customer ends up buying more product than he actually wanted. So we see not only volume rises but price increases.
Now for the spin: so the worst is behind us. Volume and prices are back to rising. Don't look elsewhere (retail data; the huge expansion of Nanotubes snaking towards a depleted industrial base near you; the insider sell/buy ratio doing an about face from near record levels...) for consistency.
Now for the prayer:
Jesus saves and Bloomberg reports that save from the ravages of a housing decline. Formerly known as a Bust, were it not for Bloomberg...God have mercy. Amen.
The seasonally adjusted stock/sales ratio fell to a recent low, while the non-adjusted ratio hit a cycle high.
I think we can rerun our hosts mortgage applications warning here. November is a bad time of year for seasonal adjustments. It is among the weakest sales months of the year, and efforts to make it look more normal through adjustment can do weird things.
This doesn't seem to jive with the builders' own reporting, and flies in the face of boatloads of (admittedly anecdotal) evidence.
Moreover there seems to be a major disconnect between sales (1.047 million) and housing completions. Weren't completions for resale running at something closer to the 1.4 million mark?
How should these two things relate in a "healthy" market?
JM highlights the key issue. With low rates and high incentives, people are still paying more than than can afford to buy a new house. So while the prices of individual houses may fall, the amount spent on new houses stays the same. Ex: (I invest the same amount each paycheck in my 401k, I may get alot of stock or a little, but you won't know it buy looking how much I spent, only on what I actually got for it)
Also, by definition anyone buying now probably believes that it's at bottom or near so. They likely want to spend as much as possible to get more than they could have a year ago and ride the "wave" of housing appreciation on the way back up.
This begs the question: If home sales are at 2001 levels, is Real Estate related employment at corresponding 2001 levels? Shouldn't we see similar levels of employment in Construction, Lending, Realtor, and Home Improvement (landscaping, swimming pool, masonry, custom fencing)?
And a follow-up:
If RE related employment is higher than it was in 2001 and sales stabilize where they are right now, why would someone expect employment to remain higher than 2001 levels, given current sales?
Note that I don't expect sales to stabilize here. I expect they will drop until RE is considered a toxic investment, same as happened during last bust.
I have come to despise this report. Not the report actually, but the way it is reported.
Once again the seasonally adjusted number appears to be very misleading. Despite what is otherwise indicated, sales in November (shown by the NSA figures) were actually smaller than October, and not by an insignificant amount, but 6K (7.7%).
YOY sales also were off by more when you check the NSA number (16.2% NSA vs. 13.1% SA).
I realize the effort is to make the monthly and YOY comparison's more fair, but to the degree that such calculations depart from reality, shouldn't the adjustment be adjusted?
Idaho_Spud, employment is close to the highs since builders are still completing a record number of homes each month. This doesn't show up in the inventory numbers because of the unprecedented level of cancellations.
So, yes, housing related employment will fall significantly in the coming months.
4shzl, New, which I also follow as a key indicator of future credit tightening, is weaker because it is ex-dividend $1.90. However the overall trend of both the share price and news on this company is negative.
This might be a dumb question, but what constitutes a house for sale, but not started? Isn't that the real estate equivalent of vaporware? What do they have to have to count it as inventory? A lot and a permit? A wing and a prayer? It seems to me that "inventory" could be reduced or increased somewhat arbitrarily in this category.
The number is on the lower right side in the November column.
I was surprized as anybody but heard an analyst mentioned this a month ago and thought it was a wierd way to count inventory. Its like GM calling it a car when the parts arrive on the dock.
But if you look at history including empty lots and homes under construction, a 4.0 month supply is normal even in the best market.
So a 2 month supply with this current low sales rate is not all gloom and doom.
I hate to sound like a bubblehead trying to poke holes in statistics that don't meet his preconceived notions, but there really seems to be some disconnect here. According to these stats, inventory has been falling for 4 months, median prices have been generally rising and sales have held essentially steady for six months.
This doesn't seem to jive with the builders' own reporting, and flies in the face of boatloads of (admittedly anecdotal) evidence.
...and, worse still, it doesn't fit my preconceived notions!
As CR writes, the inventory figures do not include cancellations; when a home is "sold" it's subtracted from the inventory, but it's not added back if the sale falls through before closing.
Median prices are being deceiving because of the many incentives being offered, and reflect the amounts that people are willing to spend rather than builder success in getting prices with high margins. As mortgage rates haven't risen, a buyer who could spend $500k a year ago can and will still do so today, but today they get a home that would have sold for much more a year ago.
existing home sales will tell what's going on..my hunch is new homes are doing well at the expense of existing ones.
Let me say it before the rest of the financial media beats me to it:
SOFT LANDING. BUY MORE STOCKS AND FINANCIAL SERVICES NOW!
And those incentives not only help (improve the appearance of)[and if you look good, you feel good and if you feel good, you are good to go so get out there and be gone] the sales volume, but like the auto incentives, the customer ends up buying more product than he actually wanted. So we see not only volume rises but price increases.
Now for the spin: so the worst is behind us. Volume and prices are back to rising. Don't look elsewhere (retail data; the huge expansion of Nanotubes snaking towards a depleted industrial base near you; the insider sell/buy ratio doing an about face from near record levels...) for consistency.
Now for the prayer:
Jesus saves and Bloomberg reports that save from the ravages of a housing decline. Formerly known as a Bust, were it not for Bloomberg...God have mercy. Amen.
The seasonally adjusted stock/sales ratio fell to a recent low, while the non-adjusted ratio hit a cycle high.
I think we can rerun our hosts mortgage applications warning here. November is a bad time of year for seasonal adjustments. It is among the weakest sales months of the year, and efforts to make it look more normal through adjustment can do weird things.
Can anybody tell me what's happening to NEW? (I woke up this morning and my favorite canary appears to have fallen off its perch at 34 . . .)
This doesn't seem to jive with the builders' own reporting, and flies in the face of boatloads of (admittedly anecdotal) evidence.
Moreover there seems to be a major disconnect between sales (1.047 million) and housing completions. Weren't completions for resale running at something closer to the 1.4 million mark?
How should these two things relate in a "healthy" market?
JM highlights the key issue. With low rates and high incentives, people are still paying more than than can afford to buy a new house. So while the prices of individual houses may fall, the amount spent on new houses stays the same. Ex: (I invest the same amount each paycheck in my 401k, I may get alot of stock or a little, but you won't know it buy looking how much I spent, only on what I actually got for it)
Also, by definition anyone buying now probably believes that it's at bottom or near so. They likely want to spend as much as possible to get more than they could have a year ago and ride the "wave" of housing appreciation on the way back up.
you can spin it anyway you want CR yet it's more support for a stabilizing market.
Another strong report (especially pricing), but the NSA graph shows a weaker story
Richard, I don't think I added much "spin" to this report. There are two views of the housing market - and this report could fit either view.
Next year will be interesting.
Best to all.
CR,
Would November sales reflect September, October transactions? Is there a 60-90 day lag?
This begs the question: If home sales are at 2001 levels, is Real Estate related employment at corresponding 2001 levels? Shouldn't we see similar levels of employment in Construction, Lending, Realtor, and Home Improvement (landscaping, swimming pool, masonry, custom fencing)?
And a follow-up:
If RE related employment is higher than it was in 2001 and sales stabilize where they are right now, why would someone expect employment to remain higher than 2001 levels, given current sales?
Note that I don't expect sales to stabilize here. I expect they will drop until RE is considered a toxic investment, same as happened during last bust.
I have come to despise this report. Not the report actually, but the way it is reported.
Once again the seasonally adjusted number appears to be very misleading. Despite what is otherwise indicated, sales in November (shown by the NSA figures) were actually smaller than October, and not by an insignificant amount, but 6K (7.7%).
YOY sales also were off by more when you check the NSA number (16.2% NSA vs. 13.1% SA).
I realize the effort is to make the monthly and YOY comparison's more fair, but to the degree that such calculations depart from reality, shouldn't the adjustment be adjusted?
from New Jersey Real Estate Report -
NSA North East is in a far worse condition.
Oct 99: ~5,000
Nov 99: ~5,000
Oct 00: ~6,000
Nov 00: ~5,000
Oct 01: ~5,000
Nov 01: ~5,000
Oct 02: ~5,000
Nov 02: ~4,000
Oct 03: ~7,000
Nov 03: ~6,000
Oct 04: ~8,000
Nov 04: ~6,000
Oct 05: ~6,000
Nov 05: ~6,000
Oct 06: ~3,000
Nov 06: ~3,000
http://img250.imageshack.us/img250/1833/jan1973nov2006km5.jpg
Idaho_Spud, employment is close to the highs since builders are still completing a record number of homes each month. This doesn't show up in the inventory numbers because of the unprecedented level of cancellations.
So, yes, housing related employment will fall significantly in the coming months.
Best Wishes.
4shzl, New, which I also follow as a key indicator of future credit tightening, is weaker because it is ex-dividend $1.90. However the overall trend of both the share price and news on this company is negative.
This might be a dumb question, but what constitutes a house for sale, but not started? Isn't that the real estate equivalent of vaporware? What do they have to have to count it as inventory? A lot and a permit? A wing and a prayer? It seems to me that "inventory" could be reduced or increased somewhat arbitrarily in this category.
completed houses for sale continues to increase.
Moopheus - a great question! They're counting as inventory empty lots in subdivisions ready to build upon.
The "real" number I would be concerned about would be finished homes sitting and waiting for a buyer, about 169,000 homes, a 1-2 month supply.
The "real" number I would be concerned about would be finished homes sitting and waiting for a buyer, about 169,000 homes, a 1-2 month supply.
Source please?
Page 4 of the report cited at the top of this article:
http://www.census.gov/const/newressales.pdf
The number is on the lower right side in the November column.
I was surprized as anybody but heard an analyst mentioned this a month ago and thought it was a wierd way to count inventory. Its like GM calling it a car when the parts arrive on the dock.
But if you look at history including empty lots and homes under construction, a 4.0 month supply is normal even in the best market.
So a 2 month supply with this current low sales rate is not all gloom and doom.