Investors are Idiots - Monday's Stock Market Gains

Did anybody else feel that something was fishy about Monday's stock market bounce?

Headlines like this - "Stocks surge on bank plan, rise in home sales" made me a little curious about what they were using as a sign of a rise in home sales.

As usual, the media is making a hash of the statistics.

Yes sales rose in February over January, they almost always do as housing sales are seasonal.

In reality, according to the NAR housing sales were DOWN 4.6% from February 2008. That's the important statistic, not that they were up 5% from January.

How is Portland doing? While the number of closed sales were up 17% from January they were DOWN 38.1% from February 2008. (Clint's charts show this well here.)

So while the overall US market is showing signs of nearing a bottom, Portland is still showing signs of being in the throes of a major decline.

And once again I'm left shaking my head at the quality of the journalism in the US.

Lying with Statistics - Why All Newspapers Will Be Bankrupt Soon

The February RMLS report was released a few days ago, and this is how the Oregonian reported it:

"The good news: Home sales up in metro area"

Jeff Manning starts the article with "Closings jump 17.1% in a month" and of course the headline is skewed to be positive. To be fair he does talk about the fact that closed sales are DOWN 38.1% from Feb. 08.

That's the real news. Closed sales are way down, and don't show any sign of increasing. The increase from January is meaningless, and Jeff should know this.

Real estate sales are seasonal, so comparing month to month variations are meaningless. Of course sales were up in February, they always are. That's not news.

So then why report it? Is it because the Oregonian is heavily reliant on ad revenue from the Real Estate industry, and is afraid of offending them?

I can only assume so.

Frankly, the need to pander to advertisers is why I have lost all respect for serious newspapers. Bloggers might not always get it right, but you can be sure that I don't have any hidden agendas or advertisers that I need to protect.

I honestly believe that most newspapers will be gone soon (as do others) and I can't say I'll miss them. I don't trust much of what I read these days (certainly not on Fox, but also on the mainstream outlets) as most papers are too tied to their advertisers to be neutral.

The Oregonian's web site is also a joke. I can rarely find articles that are in the print section, the front page is a mess, there is no structure, content is hard to find, it's just sad and pathetic all around.

I'll post more about the results later.

Politicians Wanted - Math Skills Not Required.

Apparently math is not a required subject for politicians. As this post points out, even the most basic back-of-the-lobbyists-cocktail napkin calculation shows a price that's almost 4x higher than the number's being thrown around.

"Somehow, Isakson puts the cost of his tax break at just $19 billion. Let's break the Washington rules and try a little arithmetic. Even with weakness in the housing market, it is still virtually certain that we will sell close to 5 million homes in 2009. The overwhelming majority would qualify for the full credit. So, we get 5 million times $15,000. That sounds a lot like $75 billion."

Even if we assume the average house is only worth $100k, so the average credit will be $10k, that's still $50B not $19B.

Seriously, how do we let these people "represent" us? If the credit will work, fine, but let's put a real price on it not some made up number.

If anyone has any insights into their calculations I'd love to see them.

Hey, it's the new REMAX bubble!

jasper pointed out the advertisement, thinly disguised as a news story:

" MAX EQUITY ROUNDTABLE SUGGESTS POSSIBLE “NEW REAL ESTATE BUBBLE” THEORY"

Here's an excerpt. Warning: Please put down anything you might be drinking, or else you might end up spiting it all over your PC due to spontaneous laughter.

"BEAVERTON, Ore. — Is a new real estate bubble forming? Executives at RE/MAX equity group think so. Gary Taylor, principal broker at the firm’s Sunset Corridor office and head of the company’s panel who studied recent market data and the prevailing theory, recently released the panel’s findings.

Local brokers are seeing steady sales through this “new market”. Last month the Portland Metropolitan area had 1,384 closed sales, up 27.6 percent from January 2008 (1). What the brokers are hearing is a real demand from individuals with a sincere desire to buy, but limiting factors are hindering their ability to execute a transaction."

Ah yes, the old monthly sales increase ruse. What they forgot to mention was that sales in Portland were DOWN 29% year over year. The February bump is seasonality, it happens every year. Yawn.

"Some of the factors that the panel identified in the current market:

Contingencies. Brokers are seeing a higher than normal amount of contingent offers, relative to total sales. These contingencies usually include the potential buyer’s ability to sell their primary residence."

Ah I see, this is a "wishful thinking" bubble. I wish I could sell my house, so I could buy a bigger house. The reality is, with no entry level buyers thanks to the elimination of funny money and zero down loans, others can't trade up.

"Deals, Deals, Deals. Brokers are hearing from their clients that are confident that the market may have hit bottom and is on the way back up. This has resulted in buyers acting on aggressive marketing tactics from local builders, as well as sellers trying to market their property. "

This would be the "hearsay" bubble. We hear there are buyers out there! Of course people are acting on builder incentives, I might be tempted by 50% off too!

"Financing Woes. The tightening of the ability for many to get mortgages may be true, but that has not affected the desire of buyers. In the last two years, there have been nearly 2 million new households formed (3), and it’s likely they will soon be in the home buying market. "
More wishful thinking. Those new households now need real savings to buy a house, and most people don't know the meaning of savings.

Gary Taylor and his team must be real geniuses to spot this bubble before the rest of us, I'd like to thank him for bringing it to our attention!

Lying with statistics

One of our reader's sent in a link to this article on CNNMoney.com, "Home sales rise on biggest-ever price drop".

"The National Association of Realtors reported that sales by homeowners rose 2.9% in February to a seasonally adjusted annual pace of 5.03 million, up from January's reading of 4.89 million. It was the first month-over-month rise of the annualized pace since July."

This comment makes it seem like sales have bottomed out and are starting to rebound. The NAR (and the mainstream media) loves to quote month over month increases and declines, when they should be focused on year-over-year changes.

"Though February's pace beat economists' expectations, sales last month were still down 23.8% from a year earlier. Economists surveyed by Briefing.com expected the report to show existing home sales slowed to an annual pace of 4.86 million.

The median price of a home sold during the month fell 8.2% to $195,900 from $213,500 a year earlier - the largest year-over-year price drop on record. Before the start of the current housing slump, it had been 11 years since prices declined, when compared with the same period a year earlier.

"That's a huge drop in prices, which is how you move the merchandise," said Kasriel.

Sale prices have now fallen 15% from their peak in July 2006, and are down 14% from June 2007, when the most recent steady downturn began. That brings the median price of existing homes sold down to May 2004 levels."

There's the real story. Even though prices have dropped 8.7% from February last year (the largest drop ever recorded), sales are still down almost 24% from last February. That doesn't sound like the merchandise is moving to me.

If you look at the recent chart I posted on sales per month, you'll see that an increase in sales is totally normal for February. (this is Portland data, but I'm sure nationally you see the same trend) That's not news. The fact that sales didn't increase with an 8% decrease in prices? That's news. That means we're far from the end of the slump.

"The report is a sign that the price environment is weaker than the Realtors' most recent forecasts. Though NAR chief economist Lawrence Yun said in a release that a "notable gain" in existing home sales is not expected until the second half of 2008, the Realtors' March forecast called for only a 6.3% decline in housing prices in the first quarter, compared to a year ago. NAR also forecast a median price of $200,500 for the first quarter. Given the current environment, March sales would need a very strong showing, both in median prices and the pace of sales, to reach the Realtors' forecast."

Ouch.