May 24, 2007

Bubble, Schmubble: Median Home Sale Price Decline Almost Entirely Due to Regional Mix

That’s right. Bubble, shmubble, despite this picture from Matt Drudge, who got snookered on this one:


Fire sales, schmire sales.

The Chief Snookerer in the latest search for the elusive housing bubble is Martin Crutsinger of the Associated Press, with a significant assist from the Commerce Department (link is to a PDF), which inexplicably did not, and apparently does not, report the regional sales data needed for a more detailed look.

Crutsinger took Commerce’s housing report showing a significant decline in the nationwide median selling price of a new home, both in the past month and year over year, and ran with it at an all-out sprint (bold is mine; BizzyBlog copy for future reference):

….. the median price of a new home sold last month fell to $229,100, a record 11.1 percent decline from the previous month. The big price decline indicated that builders are slashing prices in an effort to move a huge overhang of unsold homes.

The drop in median prices in April compared to March was a record one-month decline. If the April sales price was compared to the sales price a year ago, the decline was 10.9 percent, the biggest year-over-year drop since 1970.

So should we all start looking for cardboard boxes and bridges as our home-value declines swallow up our equity?

Uh, no.

Most obviously, the Commerce report itself shows that the inventory of unsold homes dropped from 8.1 months in March to 6.5 in April — which makes sense, given April’s huge increase in home sales. The fact is, the April “overhang” hung way lower than it did in March.

Less obviously, because Commerce didn’t include regional sales prices, about 90% of the “big price decline” can be explained by big changes in the mix of where homes were sold in April, compared to March and compared to April 2006. In both cases, sales as a percentage of total sales have declined significantly in the West, which is by far the most expensive region in the country. At the same time, sales in the South, the second-least expensive region which comprises more than half of all sales, have increased their percentage share.

The following pictures illustrate what I’m referring to. I used Commerce Data in the report just issued for unit sales, and National Association of Realtor data for regional median sales prices at a spreadsheet that is available at the second link at this NAR page. The sale-price data from NAR is from March 2007 and April 2006, as their April report has not yet been released:


Even without doing the math, you can clearly see that if you mix in a higher proportion of sales from a cheaper part of the country with fewer sales from the most expensive one, the medians will naturally come down, even when no one region is suffering a steep decline.

I estimate that after changes in mix are taken into account, the overall change in home-sales prices from March to April was about -1.2% (vs. the overall -11.1% reported), and about -1.5% (vs. the overall -10.9% reported) from April 2006. The details supporting those estimates are at a separate post here.

Crutsinger also clearly erred by giving readers the impression in the third and fourth paragraphs of this excerpt that the changes described were month-over-month instead of year-over-year (bold is mine):

The jump in sales was the biggest increase since a 16.4 percent surge in new home sales that occurred in April 1993.

However, analysts cautioned against reading too much into the big gain, especially in light of other surveys showing that builder confidence has sunk in recent months over worries that troubles in the subprime mortgage market will further crimp demand in coming months.

There was also concern because all of the strength in sales came in one region of the country, the Northeast, which saw a surge of 43.1 percent.

Sales were down 28.1 percent in the Midwest and 25.4 percent in the West. Sales fell a smaller 3.4 percent in the South.

The drop in median prices in April compared to March was a record one-month decline. If the April sales price was compared to the sales price a year ago, the decline was 10.9 percent, the biggest year-over-year drop since 1970.

The 16.4% in the first paragraph was the one-month increase from March to April, but the percentage changes in the third and fourth paragraphs are from April 2006 to April 2007. Crutsinger never told his readers he was switching gears (and switching yet again in the fifth excerpted paragraph). The fact is that in April, instead of having a “fire sale,” the South’s housing market was “on fire,” with sales increasing a whopping 28% over March. Far from showing a big “strength in sales,” the Northeast was up only about 4% in April over March, while the West and Midwest were up 8.5% and down about 4%, respectively.

All of the above renders the inevitable straw-grasp by Crutsinger look really lame as he, like so many other business reporters during at least the last four years, rolls out the R-word yet another time (bold is mine):

Analysts are hoping that spending by consumers and businesses will be able to overcome the weakness in housing and keep the country out of a recession.

Sorry, Martin, if you’re looking for a recession, it would appear that you’re going to have to go somewhere besides the housing market to make a your case.

Cross-posted at


UPDATE: Zheesh, I soooooo despise the way Yahoo handles AP’s coverage. It continually updates existing links instead of preserving older versions (how convenient). Crutsinger’s later report as of 6:34 PM that is now at Yahoo has the correct info for month-over-month sales volume (perhaps our favorite Martin is a NewsBusters/BizzyBlog reader/fan?). The original link above has been replaced by one at that (for now, even though it says 6:37 PM) has Crutsinger’s original reporting and errors. The link replacement was also done at NewsBusters, but without further comment.

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Carnival Catch-up (052407)

Filed under: News from Other Sites — Tom @ 9:00 am

Newshound’s 67th on Ohio Politics is here, and his 66th is here.

Boring Made Dull has had several on Econ and Social Policy that haven’t been linked here as of yet:
- April 8
- April 22
- May 7
- May 20

Today’s ‘Read the Whole Thingers’ (052407)

Former Nebraska Senator Bob Kerrey, who served as a member of the 9/11 Commission, has occasionally made a lot of sense. This is one of those times.


You too, can swear off the sensationalist doomsday prophets by joining Apocahaholics Anonymous. The link has a nice rundown of many of the flawed predictions of calamity in the past 50 or so years.


Moving on to a legitimate problem (HT CincyNation; bold is mine) –

May 21, 2007

Report: City lags economically
Named 1 of 8 financially weak in Ohio

Cincinnati is one of eight “economically weak” large cities in Ohio, and one of 65 nationally, that lags behind the rest of the country but could benefit greatly if state governments got behind efforts to revive core urban areas in the industrial heartland.

That’s the conclusion of a report ranking 302 cities across the country based on economic data released Sunday by the Brookings Institution, a Washington, D.C.-based think tank.

The data is from 2000, the latest available for all the cities studied.

….. The data by which Cincinnati was determined to be “weak” was confined to the city itself (or, for some data, Hamilton County).

By contrast, the much larger Cincinnati metropolitan area was rated “moderate” based on stronger economic conditions in areas outside the urban core.

Obviously sobering note ignored by writer John Newberry: The city was “weak” even before the 2001 riots.


On “Net Neutrality,” from the Institute for Policy Innovation — here are the final four paras from its May 17 TechBytes offering (“If It Ain’t Broke, Don’t Fix It”):

But what if we were to apply to private tollroads “highway neutrality” regulations along the lines of the “network neutrality” regulations that are being proposed for our privately-owned broadband infrastructure?

What if tollroad operators could not charge higher prices to tractor trailers because of their heavier use of the infrastructure? What if they could not offer an “express lane” to people willing to pay a little more, or who agreed to certain terms such as carpooling? What if they couldn’t adjust tolls based on demand?

It would make no sense, and all of the benefits of having a privately-managed infrastructure would be out the window. Consumers wouldn’t benefit, and the operators of the road wouldn’t benefit, so we’d be back with a stagnant infrastructure.

Fact is – operating infrastructure costs money. The best case scenario is private ownership and control of infrastructure, with markets setting prices, and with the owners free to innovate and to try new business models. We already have the best case scenario in our broadband infrastructure. And if it ain’t broke, don’t fix it.

Dither and Dissemble Today, and It Gets Worse Later: The Real ‘Lesson’ of JFK’s and LBJ’s Early Vietnam Decisions

Filed under: Taxes & Government,US & Allied Military — Tom @ 6:04 am

From a subscription-only Wall Street Journal column by Mark Moyar, author of “Triumph Forsaken: The Vietnam War, 1954-1965″ –

….. Four-and-a half decades after Kennedy dramatically deepened America’s commitment to South Vietnam, we are just now learning critical facts about his actions. This alone might cause us to beware of sweeping pronouncements about a president and his place in history while he is still in office.

New evidence shows that Kennedy reluctantly allowed Ambassador Henry Cabot Lodge to instigate the disastrous coup against South Vietnamese President Ngo Dinh Diem in November 1963, the event that did the most to draw the U.S. into the war. Lodge, a liberal Republican, favored a coup because Diem was not handling South Vietnamese dissidents the way an American politician would. During October 1963, in violation of presidential orders, Lodge secretly encouraged a group of South Vietnamese generals to revolt, igniting the conspiracy that produced the coup three weeks later.

Lodge did not notify Washington of his actions, but one week before the coup, top administration officials caught wind of it. Although Kennedy was incensed, he did not stop Lodge. In the summer of 1963, Kennedy had appointed Lodge, a prominent Republican with presidential aspirations, to be ambassador to Vietnam to shield himself from Republican criticism if the situation in Southeast Asia worsened. But this maneuver shackled Kennedy. The president couldn’t fire or rein in Lodge for fear that in 1964, a presidential candidate Lodge would accuse him of mismanaging the crisis. Like too many Democrats today, Kennedy put a higher priority on undermining Republicans than on advancing America’s interests abroad. The coup went ahead and the South Vietnamese went from winning the war to losing it because of the ineptitude of the new rulers.

Historians have always heaped blame on Lyndon Johnson for Vietnam, but not always for the right reasons. Like Kennedy, Johnson assigned a higher priority to his re-election than the good of the country. In the late summer and fall of 1964, fearing that warlike behavior and words could erode his lead over Barry Goldwater in the polls, Johnson rejected the military’s recommendations for powerful retaliatory air strikes against North Vietnam. Portraying himself as the candidate of peace, he said that he would not send American boys to do what Asian boys could do for themselves.

We now know, thanks to new sources from the communist side, that Johnson’s conduct in the summer and fall of 1964 convinced Hanoi that the Americans would not intervene if North Vietnam invaded South Vietnam. This deduction, combined with the deterioration of the South Vietnamese government, led the North Vietnamese to invade the South at the end of 1964. The invasion in turn compelled the United States to begin sending hundreds of thousands of combat troops to Southeast Asia.

Positivity: Cyclist OK After Truck Runs Over Head

Filed under: Positivity — Tom @ 5:59 am

Somebody is very lucky (and smart) to be alive (HT FYI News):

May 14, 2007

MADISON, Wis. – A delivery truck ran over a cyclist’s head, leaving him only with a concussion and a mangled helmet. Ryan Lipscomb, 26, was shaken up, especially after he saw the condition of his helmet.

“I didn’t see it coming, but I sure felt it roll over my head,” he said. “It feels really strange to have a truck run over your head.”

Lipscomb, a graduate student in medical physics at the University of Wisconsin-Madison, was riding swiftly down a bike path in Madison Friday afternoon. As he approached an intersection where he said he had a green light, he noticed the truck preparing to make a right turn in front of him.

The truck wasn’t going to stop, Lipscomb said, so he slammed on his brakes, flipping his bike and landing in the street.

A moment later the truck rolled over his head — and kept going.

Go here for the rest of the story.