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New Home Sales Numbers: What Does And Does NOT Matter

Thursday, 29 Nov 2007 | 12:29 PM ET
U.S. Department of Commerce
CNBC.com
U.S. Department of Commerce

I realize I’ve been on TV all day today talking about the New Home Sales data from the U.S. Dept. of Commerce, so it’s probably unfair of me to say it doesn’t matter, but the October numbers really don’t. What matter are the revisions, that is the changes in the September numbers.

I’ve said it before, and I’ll say it again: the current month’s data is subject to such a massive margin of error that it’s really not worth moving a market, or a pencil until you take it all into account.

Unlike the Existing Home Sales data, New Home Sales numbers are based on contracts signed, not closings, and with builders reporting cancellation rates of 35-45%, well, you do the math. September’s numbers were revised down from a seasonally adjusted annual rate of 770,000 units to 716,000 units. That’s an 8% revision right there, and today’s number is just a 1.7% bump up.

And then there’s the pricing data. New home prices in October are down 13% from a year ago, but that stat doesn’t figure in incentives from the builders, all kinds of extras that they are positively giving away in order to get rid of their vast inventories of homes.

I don’t want to nay say everything, but I also don’t want everyone to get excited that sales have suddenly turned around, and everything’s right with the world right now. It's not.

New Home Sales
Inside the numbers on the home front, with CNBC's Rick Santelli & Diana Olick

Questions? Comments? RealtyCheck@cnbc.com

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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