Rise In New Home Sales Sends Mixed Signals
March 25, 2009 by Tisa Silver
Filed under Finance
The Commerce Department reported two positive pieces of economic data today. In February, new home sales rose 4.7 percent and durable goods orders rose 3.4 percent.
Photo by Jeff Sandquist, courtesy of flickr
These figures are positive, but I find them a tad frustrating because they always come with qualifiers.
Let me explain.
The new home sales figure is supposed to measure the sales of newly built, single-family homes.
According to MarketWatch, this figure came in at a “seasonally adjusted annual rate” of 337,000. This makes for positive news since economists were expecting 323,000 units.
Why it sends mixed signals:
1. The number could be inflated since it includes canceled contracts.
2. Last month’s activity and median sales price are down 43.8 and 18 percent, respectively, versus the same month last year.
3. The figure will eventually be revised, just like the others!
How can information be used to make decisions (I’m speaking of investments here) if the information itself wreaks of indecision? I wouldn’t use any single indicator to make a decision, but an ambivalent indicator doesn’t really indicate anything.
BTW – This is a totally random thought, but someone once told me that meteorologists and economists are the only people who can give bad forecasts and keep their jobs. :)
On the whole, you have to assume this is positive news and housing is starting to stabilize at worst and begin a slight recovery at best. A normalized yield curve and the Fed driving down interest rates for refi’s and purchases helps.