The Commerce Department’s pants are on fire. From Yahoo! Finance:
Sales of new homes increased 9.6 percent in January to a seasonally adjusted annual rate of 468,000, the Commerce Department reported Wednesday. That was the fastest pace since July 2008.
The rise came as a surprise to economists who had been forecasting a sales drop in January, in part because of a belief that activity would be held back by bad winter storms in many parts of the country.
Sales had fallen 3.8 percent in December and 1.8 percent in November, leading to worries that the housing recovery could be losing momentum.
The median price of a new home sold in January was up 3.4 percent from a year ago to $260,100.
The sales gain was led by a 73.7 percent surge in sales in the Northeast. Sales were up 11 percent in the West and 10.4 percent in the South. The only region to see a sales decline was the Midwest where sales fell 17.2 percent, likely a reflection of winter blizzards that hit the region.
Ah, yes. Once again, it’s all about the weather. And notice how the housing market has defied the Law of Demand. According to the Commerce Department, demand for new houses went up when the price of a new house went up. The only way that could happen would be if the demand for houses was inelastic. It’s not:
Housing Market Basics
The housing market includes the homes available for sale and home buyers looking to make a purchase. A number of basic economic factors affect the level of elasticity in the housing market. In general, if there are more people looking to buy homes, home prices rise. If a lot of homes are listed for sale relative to the number of interested buyers, home prices are typically lower. Because homes are normally your biggest purchase, they tend to have a relatively high elasticity of demand.
But that’s not the real problem. This is:
The National Association of Realtors reported last week that sales of existing homes plummeted in January to an annual rate of 4.62 million units. That was down 5.1 percent from the December pace.
Economic schizophrenia rears it’s ugly head once again. Who should we believe, a government entity that gets its numbers from mathematical models that have been ‘seasonally adjusted’ (i.e., made up to say what we want them to say), or a group that actually participates in the buying and selling of houses?
UPDATE: apparently, all of those houses are being sold without a mortgage:
Mortgage applications to buy a home fell last week to the lowest level in nearly two decades, according to a weekly survey from the Mortgage Bankers Association.
The report is a clear sign of weakness in buyer demand heading into the usually busy spring housing season.
Total application volume fell 8.5 percent on a seasonally adjusted basis from a week earlier, while the Refinance Index was down 11 percent from the previous week.
The seasonally adjusted Purchase Index decreased 4 percent from one week earlier, to the lowest level since 1995.
Reuters concurs with CNBC:
Applications for U.S. home mortgages fell, including both new purchases and refinancings, in the latest week, an industry group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 8.5 percent to 348.5 in the week ended February 21.
The Reuters article includes this knee-slapper:
The MBA index hit its lowest level since December 2000 at the end of last year, soon after the U.S. Federal Reserve announced it would start reducing its $85 billion per month bond-buying program as the economy grows strong enough to stand on its own.
If the economy was strong enough to stand on its own, then the MBA index should have gone up when the ‘tapering‘ was announced, not down…