Are New Home Sales Rising or Falling? More Media Spin.

From the Census Bureau:

Sales of new one-family houses in February 2009 were at a seasonally adjusted annual rate of 337,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7 percent (±18.3%) above the revised January rate of 322,000, but is 41.1 percent (±7.9%) below the February 2008 estimate of 572,000.

The median sales price of new houses sold in February 2009 was $200,900; the average sales price was $251,000. The seasonally adjusted estimate of new houses for sale at the end of February was 330,000. This represents a supply of 12.2 months at the current sales rate.

Barry Ritholtz has a problem, though: all the mainstream media trumpeted the monthly 4.7% rise without mentioning the annual 41% fall! Politics is obviously more important than economics. I agree with him. Most investors have now lived through two bear markets and should have learnt that being innumerate is not the path to wealth and prosperity.

Another thing that is rarely cited are the confidence intervals. Quite simply, the more data there is the more confident are the headline figures. That 4.7% rise with a 90% confidence interval of 18.3% makes it almost meaningless, indeed the same Census Bureau wrote,“the change is not statistically significant; that is, it is uncertain whether there was an increase or decrease.” But that doesn't make much of a headline, does it!