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Junkie
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Host,
Perhaps the market has begun to turn. The data today may be a blip, according to some economist but I think otherwise. To save you the effort, I have included a link with comments from economists who think that data is problematic.
Quote:
Economists Point to Home Data Volatility
May 24, 2007 11:35 a.m.
Sales of single-family homes increased in April, the first gain in four months, rising 16% to a seasonally adjusted annual rate of 981,000, the Commerce Department said. The median estimate of 25 economists surveyed by Dow Jones Newswires was a 0.2% increase. New-home sales were 11% lower than in April 2006. The average price of a home last month was $299,100, down from $324,700 in March and $310,300 in April 2006. The median price dropped to $229,100 from $257,600 in March and $257,000 in April 2006. Economists aim to explain the surprise in the data, and point to index volatility.
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We have cautioned that double-digit gains of new-home sales are VERY unreliable monthly data points. (It is mostly due to the way the builders self-report their sales to Commerce)… Whenever new-home sales jump double digits, it usually reflects a mean reversion from the prior (or subsequent) month's reportage. Indeed, over the past 15 years of data, we found that a mean regression followed nearly every double-digit monthly gains. Typically, the subsequent month's data was significantly lowered -- flat to negative in nearly every case. --Ritholtz Research & Analytics
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Nearly all of the strength was in the South, and this depressed prices simply because the South is a lower-priced region. There was a modest decline in the Midwest, and modest strength in the Northeast and West. It remains to be seen if this is a one-month aberration… However, it is clear that indications of a mediocre Spring buying season have been put in some doubt with this report. --Joshua Shapiro, MFR, Inc.
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Only homes priced less than $200,000 had stronger sales in April. The sharp increase in sales will help home builders shed some of the huge inventory of unsold homes and could limit further cuts in new construction… Despite the April sales surge, the median number of months that a new completed home has been on the market jumped to six months, the highest since July 1993... Builders will need to maintain aggressive pricing strategies AND lower production levels to shed these inventories. Any recovery in home-building still lies well in the future. --Nomura Economics Research
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This was the biggest one-month jump in sales since April '93, but the margin of error in these numbers is massive, plus or minus 13%. One big monthly change, in either direction, does not make a trend. Note too that the sales number is at odds with the NAHB index, which fell at a steady pace in each of the three months to May, reversing all its prior gain. -- Ian Shepherdson, High Frequency Economics
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We're at a loss to explain this spike in sales in light of the recent renewed gloominess among home builders… On the other hand, the Mortgage Bankers Association's survey of mortgage applications has been showing surprising recent strength. --Morgan Stanley Research
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Today's data do help confirm that the current production/demand imbalance was not as severe as implied by miserable first-quarter sales figures. We greatly doubt that a new buying surge is under way. While the surge in sales reported in April should be discounted, today's data should add to confidence that some mild progress is being made on inventories at close to the current sales pace. --Steven Wieting, Citigroup Global Markets
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Since this is a very volatile and revision-prone series, it is difficult to read too much into any one month's report. It appears that consumers responded to lower-priced homes in April, resulting in a sharp increase in sales and a decline in the supply of homes. --Bear Stearns U.S. Economics
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http://online.wsj.com/article/SB1180...ml?mod=Economy
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"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."
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