Bad Data=Bad Information | John Burns Real Estate Consulting

Bad Data=Bad Information


We are getting a little sick of the bad data that has resulted in some very misleading headlines this month, so I am going to share some proprietary information from our June survey of 228 local building execs overseeing 12% of all US new home sales. We distributed this to our clients on Monday, July 6.

Here is the truth:

  • Eroding confidence. Builder confidence eroded slightly in June and did not spike as reported by the NAHB. We ask the same 3 questions and believe the Housing Market Index should have fallen by 1-2 points instead of risen by 4 points. Very few of our clients are far more confident in the market than they were earlier this year.
  • Rising starts. SF starts actually rose 4% this month in comparison to the 1% usual seasonal decline and did not decline 9% as reported by the Census Bureau (CB). The South, which the CB reported as the primary reason for the decline was essentially flat, with the Southeast up 2%, Texas flat, and Florida down 2%. We have four offices in the South, and none of our local team members are seeing declining starts. Also, SF permits have been rising, and builders don’t pay for permits and not start the home unless there is a weather issue. Permits are the most accurate data but do not get as much headline attention because it is a start that generates economic activity.
  • Slightly falling sales. The Census Bureau will report sales next week. The CB’s reported margin of error is so high (last month’s 90% confidence level was +/- 17% ) that this data should always be taken as suspect and viewed over a 3-month period, as the CB even states in the press release (link). June new home sales in our survey fell 6% from May, 3% of which was their normal seasonal decline. Your guess as to what will be reported is as good as mine, but I am going to bet on even more negative headlines, since sales were so grossly overstated in May.

UnitsStartedperCommunity

The bottom line is this: don’t make decisions based on newspaper articles. Read the actual press release, including the methodology, and make sure the results agree with other data points and qualitative feedback you receive. The housing market continues to improve in 2014—but at a much slower pace than almost everyone expected.

 


John Burns If you have any questions, please contact John Burns at (949) 870-1210 or by email.

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