Receive by E-mail
Receive by RSSRegister for Free
Post comments, receive updates via email, gain access to exclusive content, and more.
Spam Safe!
I want to talk about the renewed tendency of the press to reiterate the pronouncements of the National Association of Realtors (NAR) apparantly without consideration for how badly they were bamboozled by the NAR from 2003 to 2008.
Check out this opening paragraph announcing the latest “great news” on existing home sales (emphasis mine):
U.S. Home Resales Unexpectedly Increased in February
March 23 (Bloomberg) -- U.S. Sales of previously owned homes unexpectedly climbed in February as record foreclosures brought bargain hunters into the market to take advantage of lower prices.
I am not clear on this “unexpectedly” part. Home sales always rise in February compared to January. That’s just part of the seasonal dynamic of home sales.
In good years and bad, February is a better month for home sales than January. That’s why the data series is “seasonally adjusted."
Look at the purple lines connecting January to February in the chart below from Calculated Risk. This covers both bubble years and lean years.
As you can see, each of the last four years has presented a successively lower home sales figure than the year prior, but February was always higher than January, despite the yearly declines. So I am unclear what the intent was in stating that home sales "unexpectedly" rose in February.
In my book, when something happens each and every year, it is "expected."
The real story is that home sales are still declining, but you won’t find that emphasized in Bloomberg, Reuters, the NYT or elsewhere. For the most part, that critical element of the story is “hidden in plain sight."
The real fun will begin from August through December, when the series nearly always falls. That’s when you will begin to hear the NAR, and their friends in the media, display a renewed preference for the “seasonally adjusted” numbers, provided those can be spun to provide a bullish, upbeat view of the housing market.
Why do we care?
Because being less than forthright with ourselves is largely to blame for the mess we’re in.
Because we owe it to ourselves to take an unflinching look at the data and see what it says, without needing to couch it in the same soothing but patronizing tones that one might use on a 3 year old with a lightly skinned knee.
But even the numbers above, as misrepresented as they are, do not even remotely begin to display the true severity of the story.
For that we’ll have to use our ability to connect information separated by as many as a dozen paragraphs of material.
Here’s the second paragraph of the Bloomberg article.
Purchases increased 5.1 percent to an annual rate of 4.72 million from 4.49 million in January, the National Association of Realtors said today in Washington.
See what they did there? Announcing a 5.1% increase in home sales sounds good right? While we had to go and dig for a chart showing that a 5.1% increase is pretty much par for the course going from January to February, most folks would have been left with the impression that there was some sort of an unusual bounce there.
We now know that February sales are down each of the past four years and that this Jan-to-Feb bounce was nothing special at all. It was expected and ordinary. But I digress....
There’s another, even bigger, element to this story that’s just sitting there practically gnawing on the press’ lower legs, just 14 paragraphs down:
Home foreclosures were up 30 percent in February from a year earlier, according to RealtyTrac Inc., an Irvine, California-based seller of default data. A total of 290,631 properties got a default or auction notice or were seized by banks.
Lessee here...290k seized properties (many of which count as "sales" in the NAR methodology) times 12 months gives us 3.48 million homes in default, slated for auction, or seized.
When we divide these 3.48 million (annualized) defaulted or seized properties by the 4.72 million in total reported sales (also annualized), we immediately discover that a full 73% of recent housing activity was distressed.
By mixing foreclosure data with organic house sales, the NAR and the press have badly misrepresented the actual condition of the housing market.
This would be like counting auto repossessions as “sales” and then reporting a big increase in auto buying after a wave of repossessions had swept through a city.
It’s just plain wrong to count things this way, and everybody knows it. But still we do it.
Such Fuzzy Reporting was one of the prime causes of our self-induced housing excess and I am not at all clear on why continuing that practice makes sense at this time.
I think in the future I’ll refer to this as “Jiminy Cricket reporting.”
- cmartenson's blog
- Login or register to post comments
- 4389 reads
Print
Email
Comments
Are the properties seized by the banks automatically marked as sold or is it after the bank sells it?
While talking about mortgages are the alt-a option arm mortgages still going to cause problems? Will it just be a minor thing compared to all the chaos we have suffered or will there be greater consequences?
Nice read Chris, I am viewing any and all reporting of numbers through this same lens: what kind of sales are we talking about? what kinds of exports or imports are rising of falling? what are consumers buying when consumption increases (or decreases)? What are typical trends?
The way such (economic) numbers are reported seems always to skew the press (and therefore public perception) impact to the most favorable first impression - as if no one cares or it is unimportant what the information really means or indicates.
history rhymes
Chris mentions what is going to happen when we get to August and sales begin to fall. I also wonder what we're going to do over the summer as another huge wave of resets gets started. By the time we get into late summer and early fall, not only will the resets be hitting hard, but the seasonal trend in home sales will turn down. With all the money we've shoveled to the banks, I really would like to know the government plan to deal with this one. Maybe that's what the new QE program is really all about...
See this chart, showing the ARM reset action. April would be month 28 on this chart.
http://activerain.com/blogsview/202178/A...
-formerly StudentOfJefferson, reporting live from the Washington D.C. Metro Area
Thanks for clearing this up Chris. I was flummoxed today trying to figure out how they were reporting increased home sales. Are the traders really this stupid as well? They drive the market up 7% on this "great housing news" and this incredible "solution" that the treasury announced today.
Quite the great news all around the financial world today???
Why do the people in charge want to lie to the American public so badly and make this whole thing that much worse? I am trying desperately to convince a friend that now is NOT the time to buy a house, but then he sees this great news about the housing market and is convinced that we must be at the bottom. And why should he believe me when the entire main stream media is reporting all this "great" news. Things are surely looking up now!!
I am so annoyed and dismayed. I thought I was over the anger and disbelief stages, but this just keeps getting worse and more frustrating as we are constantly lied to, and I see friends and family continue to hold on to false hope ane make stupid decisions that could pootentially ruin their lives because they are BEING LIED TO.
Sorry for the rant. I wasn't angry at the beginning of this post. Now I am.
Keep up the good work Chris. And thanks from all the poor folks for the free content. It means a lot.
This kind of reporting happens at any time. Late last year there was a survey in Bavaria asking people about how they look at the near future. They could choose between good, neutral and bad, where bad also meant they feared about possible job losses. The result was something like 30% good, 55% neutral and 15% bad. Media reported "85% don't think the crisis will hurt them". One could have also said that 70% are not optimistic. It just depends on the message you want to get out.
Also, Chris is absolutely correct; we really have to watch out for the press/media and the agenda they may be pushing. One of the creepiest websites is http://www.deepcapture.com/
It is about naked short selling and the role the press, internet, and TV media have in bringing down the stock prices of certain companies, notably the website owner's company, Overstock.com.
I have read some of the website, listened to a chilling recording of a phone call with a reporter, and basically felt soiled afterwards. It's disgusting.
For an excellent presentation on what is naked short selling, one of the reporters on this website gave a lecture at University of Texas, "Lecture on Abuse of Social Media by Stock Manipulators." This is about using the internet to trash stocks, and also explains naked short selling. For the first time, I learned about the DTCC.
http://www.deepcapture.com/category/anti...
After you poke around on deepcapture and get really mad, go here and see how many "Failures to Deliver" have occurred on your favorite stocks (data from the SEC):
http://failurestodeliver.com/
Nice post, Chris! It is informative to get a look at the year over year data on home sales. Obviously, the 'increase' for Feburary is just a seasonal trend; for this type of data, the year to year is more telling of the current situation.
Mike, the link you provided was also very informative and the graph is easy to follow...by the looks of things, May and June will be interesting--2010 will be even more unpredictable. It seems like this is a terrible time for the unprepared and an interesting time for those of us who are prepared. =)
-Joe
"A government can't control the economy without controlling people" -Ronald Reagan