Economic Rebalancing

The global economy is horribly out of balance, with the United States going deeper into debt each year as a result of a huge trade gap. This blog describes the process of global economic rebalancing. If you have any comments or questions about the posts here, please don't hesitate to use the comments section.

Thursday, September 28, 2006

New Home Sales Distortions

The Census Bureau put out their monthly misinformation report on new home sales. As usual, there were steep downward revisions from past months that made the current totals appear to show a bounce in sales. This chart shows the trends for preliminary, revised, re-revised and final numbers:


Usually the bad initial estimate can be blamed on data for housing starts. Because builders are starting more homes now that haven't been sold yet, the old methodology for estimating sales yields bad results. However, the starts data was way down in August, so that excuse appears weak:


I think it is safe to assume that the data is being intentionally fudged to hide the nature of the housing market. The data is bad enough as presented, but the true story is probably getting worse all the time:


Builders keep building too many homes because they have too much land and don't want to write off the losses. Until they they let demand catch up with supply, housing will continue to go down. Plain and simple.

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