Wednesday, January 10, 2007

New Home Building Numbers are Flawed

Just in case you think that "new home building" is only off 25% (bad enough...) it's WORSE.

New-home sales are tallied by the Census Bureau, based on a sampling of contracts signed by home buyers. Running at a pace of more than one million a year for the last four years, new-home sales have been a significant contributor to the housing boom — and to the economy. (Existing-home sales, reported monthly by the National Association of Realtors, count actual closings.)

But here’s the rub: If a contract to buy a home, signed in November, is canceled in December, the Census Bureau does not subtract the failed transaction from the number of sales, or add the house back to its inventory total.

So what's the big deal? HERE'S the Big Deal:

Note that Toll Brothers had cancellations of 37%, while Pulte Homes reported a 36% cancellation rate. And as we noted last week, Lennar announced a stunning land-related write-down of $500 million.

The NAR's survey of 30 large builders, (November 2006), showed cancellations running at an astonishing 38% of gross sales. That compares with 26% for the same period in 2005, and about 18% 1H 2005. In other words, cancellations are actually accelerating.

This is not the week to start your own lumber company.

HT: THe Big Picture


Byggeservice said...

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Derrick Trucks said...

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