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New Single Family Home Sales Totaled 45,000 for August

Yesterday’s new home sales report from the Census Bureau triggered an ebullient response. Big media used words like “surge; soar; rise sharply; above expectations” to describe it. The Wall Street Journal said, “Sales of new, single-family homes rose by 5.7% to a seasonally adjusted annual rate of 552,000.” The headline number they reported reflected the monthly seasonal adjustment and sampling error multiplied times 12. The number crushed analysts’ expectations. The pundits were giddy.

Here are a few points that Big Media didn’t mention, that I think are important. First, the Census Bureau prominently points out that their headline, annualized, seasonally finagled number has an error range of +/- 16.2% at a 90% confidence interval. In other words, the headline number could be 641,000 when all the data is in, or it could be 463,000.

The Bureau estimated from its actual count of building permits plus a statistically derived estimate of contracts signed where permits had not yet been pulled, that 45,000 new houses sold (went under contract) in August. The Bureau will continue to hone in on the actual number over the next 4 months as more data becomes available from builders.

45,000 is 1,000 more than the July estimate. That’s actually pretty good, because over the past 10 years, August has typically been a down month from July, with an average decline of 2,000 units. This year the August gain was similar to last year’s 1,000 unit increase for the month. The total of 45,000 units was 25% higher than August 2014’s 36,000 units. And it is almost double the August 2010 total of just 23,000 units.

That sounds great, until you compare it with August 2005’s 110,000 sales. Of course, that was the top of the great housing bubble. So to get an idea of how 45,000 fits historical data, I calculated the average for August going back to the beginning of the data in 1963, when US population was less than half of what it is today. I calculated through August 2003, before the housing bubble really exploded. Average August sales over that 4 decade era totaled 59,000. The current figure for August is just 75% of the long term average for the month.

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