October 25, 2007
JustQuotes: Pick Your U.S. New Homes Sales Headline And Spin
U.S. New-Home Sales Rose in September After Revisions [Bloomberg]
“Sales of new U.S. homes unexpectedly rose in September after figures for previous months were revised down, maintaining concern the housing slump will restrain economic growth. Purchases increased 4.8 percent to an annual rate of 770,000 that matched the median forecast of economists surveyed by Bloomberg News. August purchases were revised down to an 11-year low of 735,000, the Commerce Department said today in Washington.”
New home sales hammered again [CNN]
“The pace of new home sales was weaker than expected in September, although it was a slight pick-up from an even weaker revised figure for the previous month, according to a government report. The pace of new home sales came in at an annual pace of 770,000 in the month, up from the revised 735,000 rate in August. Economists surveyed by Briefing.com had forecast sales would slow to a pace of 775,000 in the month.
But the report showed more weakness than the narrow miss of the forecast would indicate. Both the pace in July and the pace in August were revised lower. The previous reading of a 835,000 sales pace in July was cut to 798,000, while the original August reading to 795,000 was cut 8 percent to an 11-year low."
First Published: October 25, 2007 7:45 AM
Comments from "Plugged In" Readers
Ugggh .... new home sales are not 'up'.
The initial August number for new home sales was 795k. Compare that to the initial Sept number of 775k and sales are down.
next month when we get the revised Sept number we can compare it to the revised Aug number to see what direction sales are going.
But to compare the revised Aug number of 735k, which excludes cancellations, to the initial Sept number 770k, which includes cancellations, is not a valid comparison.
Posted by: badlydrawnbear at October 25, 2007 9:09 AM
Nobody knows what the September cancellations will be for another month. If they are less than 35k, then, yes, sales are in fact up.
Not to mentin a lot of people are going to wager on a big bump in October.
Posted by: anon at October 25, 2007 9:36 AM
^ that's true, but a 35k drop would be 4%. the august revision was 8% and in the words of the national association of home builders chief economist:
"We saw an upsurge in cancellations in August and September, according to all the builders," he said. "The net sales, if we could get that number, would clearly be weaker than this. It's too early to get hopes up on this report."
and even without a revision september sales were down 24% from 2006.
Posted by: anon2 at October 25, 2007 9:48 AM
exactly, the fact the new home sales were unexpected 'up' only occurred because the downward revision in Aug sales (cancellations) was larger then expected.
This report actually indicates on going, possibly even increasing, market weakness not strength or a recovery.
Posted by: badlydrawnbear at October 25, 2007 10:04 AM
I agree with badlydrawnbear. How can what was bad news the day before all of a sudden become good news because August turned out to be even worse than we thought?
Isn't that just even more bad news?
Trends matter of course, but apples to apples is important, and until September is revised, we have apples and oranges.
Posted by: timkell at October 25, 2007 10:16 AM
Something else to keep in mind is that these numbers suck in general.
Accoring to the US Census Bureau PDF the West was +37.7% MoM and -12.2% YoY. But the confidence interval for these numbers is +/-28.7% MoM and +/-18.6% YoY.
Those are some pretty big freaking margins IMHO.
Posted by: badlydrawnbear at October 25, 2007 10:25 AM
Amusing that homebuilder stocks bounced up on these numbers before reality started to set in.
Posted by: Amen Corner at October 25, 2007 10:27 AM
For those of you who would like more evidence on the direction of new home sales, existing home sales, foreclosures, short sales, etc...check out the Calculated Risk blog: The blog is written by bank officer and mortgage lending specialist on long-term disability and a retired finance executive. No other blog that I have encountered comes close to providing the thorough, careful, well documented, balanced, and often amusing analysis and evidence this blog provides. The blog also provides a lot of behind the scenes information about mortgage brokers, mortgage lenders, bank regulators, CDO markets, census data, etc. If you want to understand the local SF market, Socketsite is awesome. If you want to put that information into a broader national and international context, check out Calculated Risk.
Christopher Carrington PhD
San Francisco State Univ.
Dept of Sociology
Posted by: Christopher Carrington at October 25, 2007 10:31 AM
Everyone just remember that new home "sales" are not actually sales. They only count "sales" that have entered into contract, not actually closed. They do that to get faster readings on turns, since actual closings take longer.
Existing home sales numbers require actual closings, not contracts.
Posted by: scurvy at October 25, 2007 11:24 AM
Two of my couple friends just moved out of the bay area and bought...new homes in Sacramento. They can be in SF in 90 minutes if they want, and they got ginormous homes with yards in good safe neighborhoods with good schools, customized exactly how they wanted, for under 500K.
In both cases, one of the two just got a similar job in Sacramento for a slight cut in pay, so their standard of living went WAY up. The other is telecommuting and keeps the same salary.
I've lived here for decades and no one I've known has EVER moved to Sacramento. And now four people in one month. It's anecdotal, but their reasoning is not.
I can believe the new homes numbers. The differences have just become too great for newly married couples. And I'm sure some people have moved there and were unhappy and moved back, but the vast majority just finds other new things to do. They can be skiing in 2 hours. Camping in two hours too. And they won't be house poor, so they can take vacations and do other things. It was hard for me to argue with their logic.
Posted by: tipster at October 25, 2007 12:32 PM
You could always say, "Sacramento sucks!" and win any argument. But since they're your friends you probably wouldn't want to do that. Just kidding.
Maybe you don't know many people personally who have done it, but I know of one demographic that has moved that direction. The Bay Area has seen black flight outward toward Sac (and past, think Folsom) for over a decade. There are a lot of people who grew up in the City and in the Peninsula whose parents have moved out to Sacramento.
Posted by: fluj at October 25, 2007 1:08 PM
I lived in the 'burbs for five years in another part of the country. Huge house...but, so so boring. Most people don't realize how bad it stinks to live in sluburbia until they try it for themselves. It is not for me (at least), I learned the hard way. Those are five perfectly good years I will never get back. I still regret it. SF will be underwater from global warming before I move out (the same goes for most of my friends, ancedotal, I know, but since we were on the topic...).
Posted by: Craig at October 25, 2007 2:11 PM
Actually, both couples remarked that there aren't very many African Americans at all in Sacramento. That was my experience as well. It doesn't have the same multi-cultural ambiance as SF.
I don't know about Folsom, but I've seen more African American people in the Marina than I ever did in Sacramento.
I do agree that a lot of older couples are moving to Sacramento to retire - though it generally seems to be a place for early retirees - 50-60 year olds. With the great access to recreation that it provides, including rivers, it's no wonder. It isn't in my near future, but I can see the draw. And they all tend to buy brand new homes.
Posted by: tipster at October 25, 2007 2:14 PM
The perfect retirement:
Standing in a river, recreating.
Dare to dream.
Posted by: Craig at October 25, 2007 2:32 PM
Was I the only one who read that as "standing in a river, procreating"?
If I was, then shame on me. But one can dream, right?
Posted by: missionite at October 25, 2007 3:47 PM
"...but I've seen more African American people in the Marina than I ever did in Sacramento."
I'm not sure if you're being ironic but the amount of AA people living in San Francisco is pathetic for a city that claims to be so diverse. The AA's that do go to the the Marina in my experience have been few and far between. (Although I will admit I'm not in that hood very often.) Most of my AA friends would dare not consider living in the city (or even socializing here) for a variety of reasons. Look at the stats, the vast majority of the AA population in the Bay Area is in the East Bay. Honestly to experience a truly diverse progressive black community you really have to go the east coast or perhaps Chicago, Los Angeles or Oakland.
Posted by: Willow at October 25, 2007 10:28 PM
Willow, tipster was being facetious. Everyone knows there aren't enough African American people in San Francisco. Too many have left, due to numerous factors. And yes, a lot of black flight was eastward, to Oakland and beyond, to Sac. Sacramento's population is 15.47% African American. That dwarfs SF's percentage. Why tipster's friends may or may not notice an African American presence is probably down to how spread out Sacramento is. The city proper is twice the size of SF. And that's not counting West Sacramento in Yolo County or the Sac county cities like Citrus Heights, etc. Trust me. It happened, and is happening. Ask any longtime resident on this site. It's likely he/she has read numerous articles about same.
Posted by: fluj at October 26, 2007 10:29 AM
“…a lot of black flight was eastward, to Oakland and beyond…”
Unfortunately that has to be qualified as financially viable and/or successful blacks who left the city (http://www.sfgov.org/site/uploadedfiles/lhcb/homeless_count/SanFrancisco2007HomelessCount%20final.pdf ). Unfortunately, AA’s make up 30.9% of the overall homeless population in SF. Not only is the city losing diversity, a disproportionate amount of the AA’s who remain here are really struggling. One of the reasons I moved here was the diverse culture, having grown up in the ‘burbs’ of the south diversity was not an option (they used to call 5th generation people of Greek and Italian descent ‘foreigners’). Unfortunately, we seem to be pricing a lot of that diversity out of being able to actually live in the city. But I can only guess that’s a natural side-effect of having such an inflated gap between incomes and housing costs. My hope is that a much needed real estate market correction will at least help to slow this trend, but I’m not betting my stock portfolio on it.
Posted by: pica1986 at October 26, 2007 8:09 PM