by Dave Kranzler, Investment Research Dynamics:
As I detailed yesterday – LINK – yesterday’s new home sales report was complete fiction. Notwithstanding all of the other statistical manipulations that go into the Government’s Seasonally Adjusted Annualized Rate of sales metric, including flawed data sampling, Mark Hanson – who does cutting edge housing market analysis – reduced yesterday’s new home sales report to its essence:
A rounded 4,000 more homes sold on a Not Seasonally Adjusted basis than in June, ALL from the Southern region. This added up to a massive 72,000 month to month and 114,000 year over year Seasonally Adjusted Annualized Rate surge and headlines of “9-year highs,” all due to bogus seasonal adjustments that should not have applied due to the number of weekends in the month…” – Mark Hanson, M Hanson Advisors
The 4,000 more homes sold in the South month to month more than likely results from flawed data collection, for which the Census Bureau is notorious. But even assuming that the number is good, the Government’s “seasonal adjustment” sausage grinder translated that into 72,000 more homes sold in July vs June and 114,000 year over year on a Seasonally Manipulated Annualized Rate basis.
Not to pile on to what now should be the obvious fact that the Government’s new home sales report is not more credible than its employment report – both for which the Census Bureau collects the data – Credit Suisse published research earlier in this month for July in which its market surveys showed that:
its “buyer” index declined in July to 40 from 41 in June;
expected traffic declined in 29 of 40 markets in July vs 25 in June – including Portland, Seattle and New York experiencing “sharp declines;”
“Florida markets remained depressed;”
California overall was lower in July
Finally, the Mortgage Bankers Association reported that purchase mortgage demand hit a 6-month low in July. New Home “sales” are based on contracts signed. If mortgage applications and contract signings are highly correlated, as 93% of all new home buyers use a mortgage. If mortgage applications are declining, it means that contract signings are declining.
How on earth is it at all possible that the Government was able to measure a 9-year high in new home sales for July when every other actual market transaction indicator declined, some precipitously?
The housing market is headed south right now. Inventory is piling up all over metro-Denver, especially in the high-end areas. Emails to me from readers who are industry professionals all over the country are reporting similar occurrences in their areas.
The Government can populate the news headlines with fraudulent propaganda – something which has become de rigeur – but propaganda and fraudulent economic reports do not generate real economic activity. At some point the elitists running the system will be at a loss to explain the difference between their lies and reality. That’s when we’re all in big trouble…
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