The Post and Courier and the Wall Street Journal have dueling headlines in today’s papers.
The Post and Courier front page lead says this:
New home sales soar in June
The Wall Street Journal story, found on page C12, starts with this headline:
Pyrrhic Victory in June Housing Data
If I took the P&C headline at face value, I might believe that, finally, the long slide in home sales is over.
If I took the WSJ headline at face value, Imight believe that, still, the long slide in home sales continues.
Who to believe?
The storm clouds could be starting to part over the troubled real estate market.
Realtors, builders and housing experts buzzed over an announcement Monday from U.S. Commerce Department officials that new home sales jumped a surprisingly strong 11 percent last month. That increase beat analysts’ expectations and marked the highest jump for newly built homes in nine years. (emphasis mine)
Sales for June clocked in at a seasonally adjusted annual rate of 384,000, blowing past the expectations of economists surveyed by Thomson Reuters, who were looking for 360,000.
Monday’s data came on the heels of an uplifting report last week from the National Association of Realtors that existing-home sales rose during June, the third month of growth. Sales haven’t risen for three straight months since early 2004, during the last housing boom.
Charleston’s existing-home sales have yet to reflect a year-over-year increase in 2009, but the pace of the declines has eased in recent months.
The tri-county area still has a large amount of existing properties for sale. As of Monday, nearly 9,900 homes were listed in the Charleston Trident Association of Realtors’ sales database.
Many investors celebrated Monday after June’s "surge" in U.S. new-home sales. Alas, it was largely wishful thinking.
True, the Census Bureau reported sales up 11% from May. That is a big number, at first glance justifying Monday’s 4.5% leap in the Dow Jones U.S. Home Construction Total Stock Market Index. But it fails a close inspection.
First, home sales quite often jump in June, the height of the spring selling season. When trying to gauge the strength of home sales, then, it makes more sense to compare them with the same month a year ago. That comparison is less kind — sales were down 21.3% from June of 2008. (emphasis mine)
Seasonally unadjusted data show a total of 36,000 new homes were sold last month, the lowest June total since 1982, notes Richard Moody, chief economist at Forward Capital.
And the Census Bureau warns against assuming too much precision in these numbers, which are based on a sample survey. Accounting for a 13.2% margin of error — at a 90% confidence level, suggesting the actual error could be higher — new-home sales enjoyed somewhere between a 24.2% gain or a 2.2% decline from May.
New-home inventories are falling, an encouraging development. But inventories are still higher than their historical norm, and there remains an avalanche of distressed sales.
Little wonder, then, that June’s "surging" sales were driven by heavy discounting. The median new-home price — not seasonally adjusted — fell 12% in June from a year ago, to $206,200, the lowest June sales price since 2003. And it was down 5.8% month on month.
To paraphrase Pyrrhus, if sales keep soaring like this, then home builders will be utterly undone.
Two stories, two perspectives. One story is a look at data, with an understanding of statistical analysis. Call it objective, with the caveat that statistics can be manipulated to arrive at any conclusion. The other story is a compendium of anecdotal information, without an explanation of the underlying data (which discussion might reveal the facts of the data).
I’m not sure the readers of the Post and Courier are well served by their story.