The hype machine was in overdrive at the Associated Press on Wednesday as economics reporter Josh Boak covered the government's mid-morning release on new-home sales.
Boak opened by writing that "Americans rushed to buy new homes in December at the strongest pace in 10 months." Good heavens, we're talking about only 38,000 individuals or families, or about 0.031 percent of the nation's roughly 123 million households. While that's a bit of an improvement over previous months — which is why that number converted to a seasonally adjusted annual rate of 544,000, the highest figure since February — it's hardly the stampede implied by the AP reporter's use of the word "rushed."
Readers will also see that Boak continued to engage in his tired habit of benchmarking against the results of the past 50-plus years without adjusting for population growth, an exercise designed to create the false impression that the homebuilding industry is far closer to genuinely recovery than it actually is:
US NEW-HOME SALES SOAR IN DECEMBER
Americans rushed to buy new homes in December at the strongest pace in 10 months, with 2015 marking the strongest year for this segment of the housing market since 2007.
The Commerce Department said Wednesday that new-home sales surged 10.8 percent last month to a seasonally adjusted annual rate of 544,000. It was the third consecutive monthly gain since sales collapsed in September. The increase nearly pulled the sales rate even with the level of 545,000 in February 2015 and points to continued momentum for real estate and construction in the opening months of this year.
... Sales of new homes accelerated sharply in 2015, rising 14.5 percent on the entire year to 501,000. Steady job growth that cut the unemployment rate to a healthy 5 percent has given many homebuyers increased confidence, while relatively low mortgage rates improved affordability. Yet sales of new homes continue to run below the 52-year historic average of 655,200, a sign of the severe hit absorbed by the market after the housing bubble burst.
Compared to Boak's bogus 655,200 benchmark, the 14.5 percent sales increase in 2015 to 501,000 gives readers the impression that two more years of such increases will bring the new-home industry back to full recovery.
Horse manure:
In population-adjusted historical context:
- The 2015 sales level is the highest since 2008, the first year of what I have been calling the POR (Pelosi-Obama-Reid) Economy since the middle of that year.
- New-home sales during every year since the POR Economy began have been far below any previous year on record. 2015's sales are over 12 percent below the worst pre-POR Economy year of 1982. After that painful year, in stark contrast to the POR Economy's disastrous new-home sales performance, population-adjusted new home sales increase by 50 percent in 1983.
- 2015's sales of 501,000 came in 22 percent below the level seen in 1991. In 1992, then-presidential candidate Bill Clinton described then-President Bush 41 as having "the worst economic record in the past 50 years." As seen in the table, new-home sales were in the process of increasing by 18 percent as Clinton leveled his blatantly false assessment.
- Excluding the years of the POR Economy, annual population-adjusted new home sales have averaged 918,000 units. The 2015 result is only about 55 percent, i.e., not much more than half, of that average. Even if one sets the benchmark for full recovery at 800,000 annual units to account for changing demographics and the bubble years of the previous decade, the homebuilding industry would still be about four years of 14.5 percent annual growth away from fully recovering — and almost no one is predicting 14.5 percent growth this year. The consensus is that "Sales will grow about half as fast as they did this year." At that rate, full recovery wouldn't be seen for over eight years.
AP reporters can hype the currently state of the homebuilding industry as positive all they want, but their "soaring" words won't change that industry's ongoing malaise, and they won't change the ruinous economic policies which have led to what has been by far the worst "recovery" since World War II.
Cross-posted at BizzyBlog.com.
