It's another one of those news days in which some of us have to undo the naive (or is that intentional?) mainstream-media spin on the latest housing numbers. Today, the commerce department reported (launches a pdf) that for May 2007, new home sales dropped nearly 16% from the May 2006 level.
What's that "1.6% drop" the rest of the headlines are reporting today?
Nothing, really. It's a sequential number, documenting a purported change between April 2007 and May 2007, which difference doesn't amount to a hill of beans. Moreover, the 1.6% figure is subject to a confidence interval of +/- 10.8%. That means the real number could be anything from a 9.2% increase to a 12.4% decrease. In other words, the data don't permit us to call the sequential change either way.
It matters little. As I mentioned yesterday, big year-over-year drops in home sales are what illustrate the reversion to reality, and those numbers are skipping merrily downward, hand in hand with big increases in inventory. Whereas May 2006 saw six months' supply of new homes on the market, we now see seven months' worth, and this despite the fact that homebuilders like Lennar
Meanwhile, inflation marches on, and the markets continually imagine that Ben Bernanke and the Fed will bail out the American consumer with another huge dose of cheap money. Talk about rose-tinted blinders.
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At the time of publication, Seth Jayson had no positions in any company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.
