Housing Decline Continues

Today's New Home Sales report showed an increase in the annualized sales rate for May over April. However, the overall trend is downward. The annualized New Home Sale rate has been less for each month of 2006 compared to the same month one year earlier. February 2006's annualized rate of 1.038 million was much less than February 2005's 1.247 annualized rate. March 2006's 1.114 million was less than March 2005's of 1.307 million/year. April 2006's 1.180 million rate was less than April 2005's 1.269 million annualized rate. May 2006's 1.234 million is also less than May 2005's 1.311 annualized rate. In fact, May's annualized New Home Sale rate is 5.9% less than May 2005's rate. Below is a modified copy of the annualized rates from the U.S. Census Bureau (taken from a combination of March's report and June's report.)



The actual raw monthly numbers show a much larger slowdown. The actual month-to-month slowdown comparisons are February 2006 vs. February 2005, sales decreased 23 %. March 2006 vs. March 2005, sales declined 16%. April 2006 vs. April 2005, -10%. May vs. May, -5%. The year-to-date decline in New Home Sales compared to the previous year is almost 11%. All of this can be seen below on the following modified chart from the U.S. Census Bureau.




Below is a graph from Briefing.com that shows a noticeable slow down in New Home price appreciation.




It's also noteworthy how monthly New Home Sales are almost universally over-stated. Following the original publication of a month's New Home Sale number, that number is usually revised downward. In fact, going back to December 2005, the total downward revisions to New Home Sales figures is a whopping 339,000. This is a huge revision when considering May's annualized New Home Sale rate was 1.234 million. By downwardly revising each months original number, it has been possible to make it appear that each following month's sales number represents an improvement. Below is a composite copy of several months' original New Home Sales numbers that were published by Briefing.com, starting with December 2005. Notice how earlier months' estimates have been revised lower. October's initially published annualized New Home Sales rate of 1.404 million was revised downward to 1.345 million. November's initially published annualized New Home Sales rate of 1.245 million was revised downward to 1.237 million. December's original rate of 1.298 million was revised down to 1.266 million. January's was revised downward 3 times from the original 1.233 million ultimately to 1.173 million/year. February's original 1.080 million was revised down to 1.038 million. March's original 1.213 million was revised down to 1.114 million . April's 1.198 million down to 1.180 million. The sum of the above mentioned reductions totals -339,000.

(The graphic below is actually a composite of 5 separate reports from Briefing.com, taken on successively more recent dates starting on the top with December 2005, with the last one on the bottom coming from 6-26-06.)




The housing market is slowing, and slowing rapidly, despite today's report. Previous months' New Home Sales reports are universally lower than initially reported by the U.S. Census Bureau. Furthermore, there appears to be much less decline in New Home Construction. The result is a continuing increase in New Home supply that is greater than demand. The increase in supply will most certainly continue to drive prices downward.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

Wow.. I don't know how you do it, but as always -- GREAT JOB at explaining what would otherwise be major mumbo-jumbo to me.

~~ You rock ~~

Thanks for your compliment. I'm glad you liked my explanation. I delayed posting this, because I thought my explanation might have been incomprehensible. I'm glad to here it was not. I think the fact that the government keeps revising its statistics is a very important point.

Each month's initial report is always better than its later revisions.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

whether this is the 20 year cycle or soemthing more serious. My gut tells me more serious... but we shall see and I do hope it is the 20 year cycle

the continued manipulation of data to prop up the housing market. That is why they do this isn't it? To keep people buying housing stocks and homes? I agree that you make clear what otherwise would be confusing. Thanks!
:applause: :applause: :woohoo: :applause: :applause:

Yes, that certainly is why they distort the information. The real estate bulls continually slice and dice information, using highly selected, limited pieces of information in an attempt to deceive the public, and keep people buying homes.

It's the big lie theory all over again. The greater the tonnage of their overly optimistic propaganda, the more it will counter the truthful reporting on the real estate market.

They just keep repeating the few positive points available, over and over again. Never mind the fact that the previous month's sales report has usually been downwardly revised. They know people have usually forgotten about the previous months overstatement of sales. And it's difficult to prove that the previous month's reporting was actually revised downward (unless you copied and pasted the previous month's information, as I have done.)

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

Today's Existing Home Sale report showed a 1.2% decline in sales in May, compared to April. May's annualized rate of 6.67 million was 80,000 less than April's 6.75 million annualized rate. Compared to May 2005, the annualized sales rate declined 6.6% from a 7.140 annualized rate to May's 6.67 million annualized rate. (Both of these can be seen from the bottom chart below.)

From the top chart below, it can be seen that the annualized median price increased 6.0%, while the average price increased only 3.8%. Given a current annualized Consumer Price Index increase of 4.2%, the average price increase of existing homes was less than inflation.



The above information comes from the National Association of Realtors. (the link is not posted because it currently is not working.)



unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

of 16% in his neighborhood... over the last three months, that is why I do beleive what we are facing ain't the 20 year cycle

16% is a pretty large decline in the last 3 months. Where does your brother-in-law live?

and yes it is pretty steep

Yes, indeed. San Diego is leading California in home sale declines and price appreciation declines.

According to Housing Tracker, asking prices in San Diego have declined 4.6% since 8/14/05. Over the same period of time, inventories have increased 54%. This can be seen at the link below.

San Diego: Asking Prices & Inventories

According to DQ News, the May-to-May all-home price increase in San Diego was only 3.4%. This is less than the Consumer Price Index increase of 4.2%. Below is the link to the price breakdown in San Diego from DQ News. (The "all-home" change is to the extreme right of the chart.)

San Diego: May-to-May Price Change

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

Topped out in Aug/2005 and killed by Fed rate hikes. Great clasic short candidates now.

http://stockcharts.com/gallery/?%24hgx

rental rates? Or am I asking @ apples & oranges? Do rents tend to follow housing sales pricing up & down?

I ask because today I was notified that I have a 25% rent increase in 30 days - like we weren't struggling enough already! Our area is definitely had a slow down in starts, but the prices haven't seemed to move much. If anything the upward surge seemed to hit here just as they were starting to ebb down elsewhere (kinda like being on the tail end of the train). My area is primarily the 'low-rent' part of town (Bakersfield, CA - specifically Oildale, CA ... the name Oildale should be a clue as to just how undesirable an area it is!), & the frigging 1 room shacks are going for more than double what they were going for only a year or so ago!


I am not sure just how we're going to pay this, I can't work any harder than I already do - dayum!

Supposedly the decreased demand for homes will result in a compensatory increase in demand for rental units, thus increasing rental rates. That's what a lot of the experts are claiming, at least.

To me it seems like there will still be lots of homes to rent, if not more, due to the reduced ability to sell them. Would-be sellers of 2nd and 3rd homes may be forced to put those homes up for rent, rather than sell them. So that should have a suppressing effect on overall rentals when combining the sum of both homes and apartments.

Maybe the experts are correct about the effect of increasing rents. But that doesn't seem like a sure thing to me.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

Lake Co.(CA) reporting:

Lots of houses for sale. Not much seems to be moving, however. I think the run of building spec homes is just about to end. There are quite a few empty new houses waiting to be sold, some are quite overpriced, given their location.

I think the local RE people are overly optimistic, since sales are usually to people who have sold out in more expensive areas. A few can see the handwriting on the wall and have moved to other jobs. I sense the whole "boom" grinding to a halt, taking the rest of the economy with it. If the Little Emperor and His Minions order the bombing of Iran, our economy is toast.

It's worthwhile to point out again how previous months' overestimates have been revised downward in current releases. In this case, the downward revisions are to Residential Construction figures, as well as overall construction figures.

Once again, the previous 4 months' original numbers for Residential Construction were all higher than they are currently listed. Below are partial copies of charts from Briefing.com. The top chart (the "preliminary" chart) was copied down on 7/2/06. The bottom chart is from 7/3/06. It was copied down less than 24 hours later. Not only is the actual overall Construction Spending much lower than previous estimates, but "Residential" Construction Spending is much lower as well. Below is a modified copy of both charts, showing the difference between the previously reported information (and overall construction estimate) and today's reported "actual" numbers.



Today's Contruction Spending from Briefing.com figures can be found at Construction Spending (Also notice how the left out the "-" sign from today's reported total Construction Spending change of -0.4%. At least initially, it was posted as 0.4%, instead of -0.4%.)


Note that overall Construction Spending declined 0.4%, instead of increasing 0.3% as was originally estimated.

Note how April's Residential construction was revised downward from a change of -1.1% to -1.2%
(a change of -0.1%)
Note how March's original increase of +1.0% was downwardly revised to +0.3%
(a change of -0.7%.)
Note how February was downwardly revised from +0.6% to +0.2%
(a change of -0.4%.)
Note how January's original -0.4% was downwardly revised to -0.6%
(a change of -0.2%).
The sum total of the downward revisions since January 2006 is -1.4%.

How is it that all previous numbers have been revised downward, while none have been revised upward? Does anyone really believe these are
"honest" mis-estimations? If they were "honest" errors, how is it that
all previously posted statistics were too high initially? Shouldn't some of these "honest" mis-calculations have been too low?

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

I revised the previous post to include information published on 5/31/06. It shows an even larger downward revision of February and March's original numbers. Here it is:

It's worthwhile to point out again how previous months' overestimates have been revised downward in current releases. In this case, the downward revisions are to Residential Construction figures, as well as overall construction figures.

Once again, the previous 4 months' original numbers for Residential Construction were all higher than they are currently listed. Below are partial copies of charts from Briefing.com. The top chart was copied down from Briefing.com on 5/31/06. The middle chart (the "preliminary" chart) was copied down on 7/2/06. The bottom chart is from 7/3/06. It was copied down less than 24 hours later. Not only is the actual overall Construction Spending much lower than previous estimates, but "Residential" Construction Spending is much lower as well. Below is a modified, partial copy of the 3 charts, showing the difference between the previously reported information (and overall construction estimate) and today's reported "actual" numbers.



Today's Construction Spending from Briefing.com figures can be found at http://www.briefing.com/Investor/Public/MarketAnalysis/Calendars/EconomicReleases/const.htm>Construction Spending (Also notice how they left out the "-" sign from today's reported total Construction Spending change of -0.4%. At least initially, it was posted as 0.4%, instead of -0.4%.)


Note that overall Construction Spending declined 0.4%, instead of increasing 0.3% as was originally estimated.

Note how April's Residential construction was revised downward from a change of -1.1% to -1.2%
(a change of -0.1%)
Note how March's original increase of +1.6% was downwardly revised to +0.3%
(a change of -1.3%.)
Note how February was downwardly revised from +1.3% to +0.2%
(a change of -1.1%.)
Note how January's original -0.4% was downwardly revised to -0.6%
(a change of -0.2%).
The sum total of the downward revisions since January 2006 is -2.7%.

How is it that all previous numbers have been revised downward, while none have been revised upward? Does anyone really believe these are
"honest" mis-estimations? If they were "honest" errors, how is it that
all previously posted statistics were too high initially? Shouldn't some of these "honest" mis-calculations have been too low?

unlawflcombatnt

EconomicPopulistCommentary

Economic Patriot Forum

_________________
The economy needs balance between the "means of production" & "means of consumption."

beautiful downtown Baghdad ...

Very True. We've got a ways to go before it gets that bad.

Actually I am looking forward to a strong recession in 2007.
That will boot the repugs out of office in 2008. Bad news is
good news for us.