Apr 25, 2012
Bad reporting, new-home sales, and the Commerce Department
25 Apr 2012
Posted by Andrew Kantor
Behold, nonsense. Here are some headlines today:
- New Home Sales Slide in March
- US new-home sales off 7 percent in March, largest decline in a year
- New home sales plunge in March
This is known as bad reporting. The worst comes from Karl Case via Yahoo Finance: “The American Dream Of Buying A Home May Be Over.”
If any of these people bothered to actually check the facts, they’d know better. Instead, you’ve got a whole lotta nonsense.
New-home sales were actually up in March.
And I’m not saying that to paint some sort of rosy picture. (If you read VARbuzz, you know that’s hardly the case.) I say this as A) a former business reporter, and B) someone who actually took the time to read the Commerce Department report.
- The Commerce Department actually said that new-home sales were up in March.
- It doesn’t matter, because even the Commerce Department says it’s numbers may be wildly off.
- In fact, the numbers it reported in February were wildly off and had to be revised: “February’s figures on new-home sales, however, were revised sharply upward to show a 7.3 percent gain, instead of the 1.6 percent decline that was initially reported.”
Let’s look at the facts. And it won’t take long.
- The Commerce Department reported that sales of new homes were down from February to March by 7.1 percent (plus or minus 20.7%).
- It also reported that new-home sales were up from March 2011 to March 2012 by 7.5 percent (plus or minus 19.6%).
Everyone’s writing about the first number, which is foolish. Because the first number doesn’t mean much, if anything.
First of all, it’s a month-to-month number, which is well-nigh useless; I’ve said many times that you need to look at annual trends, because monthly changes are normal, often cyclical, and don’t necessarily reflect the long term.
The more important figure is that “up 7.5% over March 2011.”
Second, it’s plus or minus almost 21%. The margin of error is larger than the number itself! What it means is that new-home sales could be down as much as 27.8% or up 13.6%. Useless!
Third, that margin of error is actually important, because Commerce had to revise its February numbers. Originally it had said that February was down 1.6% month to month, but today it said “Oops. February was actually up 7.3%.”
Bottom line: New-home construction looks like it increased in March, but we won’t know for sure until the revised numbers come out and that giant margin of error is gone.
So don’t believe the headlines and lazy reporting.