by Calculated Risk on 3/25/2006 02:15:00 PM

From Leslie Berkman at The Press-Enterprise - a few quotes:

"There are an awful lot of analysts and think tanks out there telling everybody in the world the sky is falling, and they have been consistently wrong," said John Karevoll, an analyst with DataQuick.

Karevoll questioned the Department of Commerce home-sales statistics, which he said are based on a small sampling projected over a national market. February is an extremely slow month and not good for making predictions, he said.

Karevoll and other analysts said the performance of the housing market in March will better indicate the trend.

These seem like reasonable arguments, except February is typically not that slow of a month. The monthly rankings are as follows over the 2000-2005 period (listed in order of number of transcations):

Top months: March, May, April, June (the Spring buying season)
Middle Months: August, July, February, October, September
Slow Months: January, November, December.

"One month doesn't count," Alan Nevin, chief economist for the California Building Industry Association, said of the Commerce Department February results. He called the cooling of the national housing market "miniscule."

I agree that one month doesn't count and February may be revised significantly. But I think the MBA Purchase Index shows there has been a double digit percentage drop in transactions from late last year. That is not "miniscule".

Chris Thornberg, senior economist for the UCLA Anderson Forecast, also was unimpressed by the reported February drop in national new-home sales.

"What I see is that the overall sales numbers are high, but they do seem like they have peaked and they are beginning to trend down slowly," he said.

And from the Commerce Department:

Steve Berman, survey statistician for the U.S. Department of Commerce, said that finding has a statistically large margin of error. More significant, he said, is that in the 12 months ending in February, the nation's new-home sales declined 13.4 percent.

Berman said concerns about February being an atypical sales month are unfounded because the department's sales numbers are adjusted for seasonal differences so they will project an annual trend.

Berman said, according to his figures, national new-home sales have been declining since reaching a record level in July.

New-home sales in February, he said, represents "a significant drop but still a historically high number. Is the sky falling? Not really."

The sky may not be falling, but as both Berman and Thornberg point out: housing sales are clearly trending down.