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| New Data Send Confusing Signals About Market Conditions |
| Written by Jonathan Smoke | |
| 05.28.2008 | |
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Discuss this article on the forums. (0 posts) The Commerce Department reported initial new home sales for April on Monday. While the April total was higher than March by 3.3%, the number was actually lower than what economists were expecting since the initial March figure was downwardly revised in this new release. The new home sales count is collected via a survey method that has a wide standard deviation, so we can’t take much confidence in the metric being slightly up. Indeed, given the standard error reported, it could very well have been down. What is good to note in this data is that progress was made on the months’ supply of new homes, which fell 4.5% as a result of the total number of new homes for sale declining while the monthly pace of new home sales increased. We hit a tiny inflection point on these measures, but the jury is out until next month to see if this is real or not. The Commerce Department also reported that new home sales prices were up. The median sales price of new houses sold in April 2008 was $246,100; the average sales price was $321,000. Both of these metrics were up from the March 2008 figures and year-over-year compared to April 2007. This is a notable stabilization signal. Again, these figures are survey based and prone to fluctuations, but if these increases hold next month, we may be seeing a very encouraging leading indicator of improving sales. Meanwhile, Standard and Poor’s released the March Case-Shiller Home Price Indices. The national composite index reported a 14.1% decline year-over-year in the latest figures. The more bearish bubble market composite known as the “10-city” recorded a 15.3% year-over-year decline. In the current fluctuating market place, these lagging historical indices are less helpful in informing us about the condition of the markets. I also continue to believe that the indices are likely reflecting a greater impact of foreclosures than are actually happening at the aggregate level. In summary, the latest data give us an unclear picture of what’s happening, which means we need to keep alert and aware of changes occurring in all relevant metrics to understand market conditions nationally as well as in local markets, where the real action occurs. 
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