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| Initial January New Home Sales Down but Shifts Are Occurring |
| Written by Jonathan Smoke | |
| 02.27.2008 | |
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Discuss this article on the forums. (0 posts) I guess it’s time to eat crow over my call on Monday that January new home sales would be higher than the average economist’s expectation for a 1.2% decline. This morning the Commerce Department reported that the initial national new home sales number for January was a seasonally adjusted annual rate of 588,000 homes. That was a 2.8% decline over the upwardly revised December rate of 605,000 homes.  To my defense, since the Commerce Department numbers are based on sample surveys, this close reading is not considered statistically significant. The 15.3% relative standard error they reported for the 2.8% decline means that the real decline could be as much as 18.1% or the “decline” could be really be a 12.5% increase.Let’s just see if the media will report on the sampling error footnotes. It was interesting to note that at least in January a shift was occurring in what sold as depicted in this bar chart. As you can see, the distribution of new home sales across price points was relatively stable comparing 2006 to 2007. But in January 2008 there was a dramatic increase in the percent of homes sold under $200,000. There was a corresponding decline in the percent of homes sold over $300,000. This is why the median new home sales price declined to $216,000. Is this reflecting a shift in sales to healthy affordable markets? Does it represent more credit available in conforming loans? We are left to ponder those questions, but it is likely that both factors are influencing the shift. It was also interesting to note that while the non-seasonally adjusted numbers for January were essentially the same as December, there were more “not started” homes sold in January while sales of specs actually declined. This could also signal that healthy markets with reasonable inventory levels are where sales are stable or even picking up while bubble markets aren’t able to move existing inventories. We can’t make much more out of this data, especially with the aforementioned level of sampling error in the numbers, but the data are potentially reflecting that changes are afoot beneath the aggregated numbers everyone else reports. 
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