On Wednesday, the Associated Press's Josh Boak added to the wire service's collection of weak "Getaway Day" business journalism by declaring that new-home sales "recovered in October."
No they didn't. The seasonally adjusted annual rate of 495,000 units reported by the Census Bureau was the fourth-lowest monthly level seen this year, even well below the 521,000 and 545,000 reported in the supposedly unprecedentedly awful winter months of January and February, respectively. Boak also claimed that "Americans recovered much of their appetite for owning new homes this year," even though current levels are at best about 70 percent of what one would expect in a pre-"new normal" healthy market.
Here are several paragraphs from Boak's bluster (bolds and numbered tags are mine):
US NEW-HOME SALES REBOUND IN OCTOBER AFTER SEPTEMBER PLUMMET
Sales of new homes recovered in October after suffering a steep drop in September, returning to this year's trend of an improving market for real estate developers and builders.
The Commerce Department said Wednesday that new-home sales climbed 10.7 percent last month to a seasonally adjusted annual rate of 495,000. This rebound followed a 12.9 percent plunge in the sales rate during September.
Americans recovered much of their appetite for owning new homes this year. Purchases have surged 15.7 percent year-to-date, benefiting from the solid hiring gains and low mortgage rates. [1]
"We still see new homes sales consistent with a moderate and sustained recovery in the housing market," [2] said Blerina Uruçi, an analyst at Barclays.
The new-home sales report tends to be volatile from month to month. Downward revisions lowered home sales reported in September, August and July by a combined 40,000.
The October figures reflected some geographical extremes. Home-buying surged 135.5 percent in the Northeast, [3] while rising less aggressively in the Midwest and South. Sales dropped slightly in the West.
... The real estate sector is still healing [2] from the bursting of the housing bubble and the 2008 financial crisis.
Sales of new homes remain below the 52-year historic average of 655,200. [4]
Notes:
[1] — While its presence beats nothing, the "surge" amounts to about 6,000 additional news homes per month in an nation of over 110 million households. For a genuine surge, see Item [3].
[2] (tagged twice) — Lord have mercy. 6-1/2 years after the recession officially ended, we're still enduring talk of "moderate and sustained recovery" and "healing." If Washington continues on its merry way as it has during that period, we'll be like Japan in 13-14 years, stewing in two decades of Keynesian misery — if the whole contraption doesn't collapse in the meantime.
The early-1980s economy under Ronald Reagan faced high unemployment double-digit inflation, interest rates of over 20 percent, and the difficulty of getting past the nation's Jimmy Carter-induced malaise. Yet, as seen below, new-home sales, which dropped like a rock during late-1981 and early-1982, quickly rebounded and eventually ascended to even higher levels during the next several years:
If Josh Boak wants to see a genuine "surge," he should look at 1983, when year-over-year monthly sales increases averaged 53 percent — well over triple the current increase he cited.
Why did this happen? Because the Reagan era had tax and economic policies that worked. Why is it not happening now? Because the Obama administration has stuck to failed Keynesian efforts involving trillions in government- and Federal Reserve-driven "stimulus" and debt, to little avail.
[3] — As seen here, this "whopping" 135.5 percent increase involves seasonally adjusting a unit sales increase from 2,000 (rounded) in September to 3,000 (rounded) in October. Recognizing this increase is a massive waste of ink and bandwidth designed to create false enthusiasm for a big, fat nothingburger. The moribund housing market in the over-regulated Northeast is at about 40 percent of where it should be — and where it would be with sane federal and state economic policies — and is still a big drag on nationwide economic results.
[4] — Boak's stat (which, based on the Census Bureau's historical data, appears to really work out to 655,600) is apparently an attempt to create a "new normal" standard below the 700,000-750,000 "healthy market" benchmark the AP was using several years ago, but which it abandoned mentioning when it became obvious that Obama administration policies willl never get us back to a truly healthy market.
Boak's effort is bogus. Properly done, it would be weighted for population in each of the 52 years involved. The population-weighted result is about 840,000. A 750,000 benchmark is reasonable, considering demographic factors, while also recognizing that sales figures in most of the previous decade were artificially inflated because of Democratic Party-driven policies which caused the housing bubble.
Thus, contrary to what Boak wrote, we shouldn't be impressed with where the housing market is — especially because in past recoveries housing led the way. During this alleged "recovery," it's been mostly AWOL.
Cross-posted at BizzyBlog.com.
