New home sales down 70% since 2005

Tom Suhadolnik
The big headline crossing the wires this morning is that new home sales in October of 2009 are up 16.2% over last month.   The Bloomberg headline and lead paragraphs by Shobhana Chandra read:

Sales of New Homes in U.S. Rise to Highest Since 2008

Nov. 25 (Bloomberg) -- Purchases of new homes in the U.S. rebounded more than anticipated in October as buyers rushed to take advantage of a government tax credit before it expired.

Sales rose 6.2 percent to an annual pace of 430,000, the highest level since September 2008, the Commerce Department said today in Washington. The median sales price fell 0.5 percent and the number of unsold homes reached a four-decade low.

 My local paper, The Cleveland Plain Dealer, paints an even rosier picture:

New U.S. home sales rise 6.2 percent

Financial reporters know their audience consists mostly of professional traders who are concerned with short term trends.  Traders might talk about historical context when they are interviewed on CNBC but they rarely consider long term data when making short term decisions.

If you are in the home building, owning or buying business - as opposed to the stock or lumber futures trading business - you probably should not take too much solace in today's numbers. 

The October 2009 seasonally adjusted new home sales the media and Wall Street seem to be excited about were 430,000. But the October 2005 seasonally adjusted new home sales were 1,424,000. An equally truthful, but perhaps more accurate measure to people living on Main Street, would be:

New US home sales fall 70 percent since 2005

Sources:

October 2009 Press Release:

October 2005 Press Release:

 

The big headline crossing the wires this morning is that new home sales in October of 2009 are up 16.2% over last month.   The Bloomberg headline and lead paragraphs by Shobhana Chandra read:

Sales of New Homes in U.S. Rise to Highest Since 2008

Nov. 25 (Bloomberg) -- Purchases of new homes in the U.S. rebounded more than anticipated in October as buyers rushed to take advantage of a government tax credit before it expired.

Sales rose 6.2 percent to an annual pace of 430,000, the highest level since September 2008, the Commerce Department said today in Washington. The median sales price fell 0.5 percent and the number of unsold homes reached a four-decade low.

 My local paper, The Cleveland Plain Dealer, paints an even rosier picture:

New U.S. home sales rise 6.2 percent

Financial reporters know their audience consists mostly of professional traders who are concerned with short term trends.  Traders might talk about historical context when they are interviewed on CNBC but they rarely consider long term data when making short term decisions.

If you are in the home building, owning or buying business - as opposed to the stock or lumber futures trading business - you probably should not take too much solace in today's numbers. 

The October 2009 seasonally adjusted new home sales the media and Wall Street seem to be excited about were 430,000. But the October 2005 seasonally adjusted new home sales were 1,424,000. An equally truthful, but perhaps more accurate measure to people living on Main Street, would be:

New US home sales fall 70 percent since 2005

Sources:

October 2009 Press Release:

October 2005 Press Release: