Last month, when new home sales fell 33%, I warned investors that “This data series is notoriously noisy, and you are must better off using a 3 month moving average than reading too much into any single month.”
This month, we see that New Home sales jumped 24%. The same caveat applies: Ignore the swings, look at the moving average to smooth out the volatility.
In fact, the series is so noisy that way back in 2005, we had to to a study to figure out what to make of it. Our conclusion?
“Looking back over the past 15 years of data, we see that a mean regression has followed nearly all double digit monthly gains. The subsequent month's data was significantly lowered "” flat to negative in nearly every case.”
I have yet to do study on the negative double digit months, but I have a suspicion it would be the same. Bottom line: Anytime you see a big gain or drop in this data series, you should expect a reversal the following month.
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click for larger chart Courtesy of Calculated Risk
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Previously: New Home Sales Data: Don't rely On It Either (November 30th, 2005)
New Home Sales Plunge 33% (June 23rd, 2010)
Source: NEW RESIDENTIAL SALES IN June 2010 U.S. Department of Commerce, Manufacturing and Construction Division APRIL 23, 2010 AT 10:00 A.M. EDT Erica Filipek or Stephen Cooper http://www.census.gov/const/newressales.pdf
Much like the local baseball team.
30 thousand new homes were sold (NSA). This is a new record low for June.
May was revised down by 33k to 267k
– Peter @ MacroNotes
So I guess one these is annualized? Anyway, if the revisions are over 10% of the figure, that’s reason along to not pay any attention to numbers and instead focus on 4 month trends (i use 4 months, so that you get a full three months of revised data)
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The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself. "”John Kenneth Galbraith
June New Home Sales, a measure of contract signings of new homes and thus post tax credit, totaled 330k, 20k more than expected but May was revised down by 33k to 267k, the lowest since at least 1963 where data goes back to. The 330k sales level combined with a drop of 3k homes for sale to 210k, brought the months supply down to 7.6 from 9.6 in May but still up from 6.1 in Apr. The West was the only region with a decline as that part of the country faces the biggest competition from foreclosures. The median new...
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