Wednesday, January 26, 2011

Home Sales Up: But Is It a Trend?

The Lehmann Letter (SM)

This morning the Census Bureau announced in December new-home sales of 329,000:

That was a 17.5% improvement over November's 280,000. Good news.

New Home Sales

(Click on chart to enlarge.)

Recessions shaded

But the chart, once again, illustrates the problem of dealing with percentages when starting from a small base. The 17.5% gain sounds impressive until you post 329,000 on the chart. Then it doesn't seem like much.

The trend line has to surge well above 400,000, heading toward 600,000, before we can say that new-home sales have left the bad news behind them.

It's symptomatic of residential real estate's depressed condition that observers are willing to focus so easily on any scrap of good news.

(The chart was taken from [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2011 Michael B. Lehmann

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