CensusBureau.con

The Government has a set a new standard for meeting expectations of unreliable data reports.  I warned this would happen in my blog post on housing yesterday.    The Census Bureau reported this morning that new home sales for August jumped 18% from July, coming in at a 504,000 seasonally adjusted annualized rate.   This was biggest month to month jump since 1992 and the highest level of new home sales since May 2008.  At this point I can’t even get on the CB website to drill down into the dirty details, so I’m going with the headline numbers, which are simply not even remotely believable or possible.

To begin with, 93% of all new home sales are financed with a mortgage.  I dug up the weekly numbers for mortgage purchase applications from the Mortgage Bankers Association, which showed that purchase applications declined 4 out of the 5 reporting periods for August.  Every week in August declined 10-14% on a year over year basis for the respective week.  Here’s the decline in purchase mortgages:

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New home sales are based on contract signings.   With 93% of all new home sales purchased using a mortgage, how is it even remotely possible that the new home sales for August jumped 18% vs August and even more vs. August 2013?  It’s just not mathematically possible.

In addition, I have now looked at the latest quarterly earnings reports for most of the nation’s largest new homebuilders.   All of them reported either flat or negative numbers for new orders.  Furthermore, as I’ve highlighted in my two most recent homebuilder stock reports, two of the biggest builders stated that the market was getting weak.  In fact, the Census Bureau reported new home sales in the West rose 50% from July and 84% year over year.   This is outright fraud, here’s why:  in my latest homebuilder report, I feature a builder with significant operations on the west coast.  This builder specifically cited a weak outlook for sales.  Furthermore, based on regional reports from both the Bay Area and Southern California – which I’ve detailed in some previous posts – the housing markets in both those areas are starting to deteriorate significantly.

Finally, the Census Bureau is reporting a sizable drop in months supply of inventory.  Again, I defer to what the actual new homebuilders are reporting.  Every single new homebuilder company with public stock is reporting their highest amount of inventory since the housing bubble peak.  Every single one.   How is it earthly, let alone mathematically, possible that new home inventory dropped in August?   That’s right, it’s not.

But don’t take it from me, here’s what the big money is saying – the homebuilder stocks are down today despite the new home sales report (click on graph to enlarge):

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The Dow Jones Home Construction Index is down almost 1%  today as I write this, despite the fact that the Dow Jones is up .5% and the S&P 500 is up over 8 points.   Not even the stock market believes the new home sales report because it’s simply not believable or even mathematically possible.

The DJUSHB is down almost 16% since its May 2013 dead-cat bounce peak, despite the fact that the S&P 500 is up well over 22% since then.   The  DJUSHB bounced to a lower high again by mid-summer this year and is currently down almost 11% from then.  This is despite the fact that mortgage reates are at 12-month lows and not far from all-time lows. That should tell us everything we need to know about the condition of the market.

If you have not looked at any of my homebuilder stock reports but want to take advantage of a market set-up to make a lot of money shorting the homebuilders, you should do it now.  When these stocks start to really tank, it will happen quickly.  If you are not comfortable shorting stocks outright, each report has a section which discusses how to use puts and calls to replicate shorting the stock.  I also offer some basic trade management strategies because this sector can be volatile.   Homebuilder Stock Reports.

If you look at a graph of the DJUSHB going back to early 2008, you can see how quickly these stocks unravel once the heavy selling really kicks in.  I believe 70-80% returns can be made just by shorting now and holding.  More can be made if you trade the market around. I am pretty certain that the company featured in my first report (third down on the list) will eventually have to file for bankruptcy, as it has as much debt now as did at the peak in 2005 despite a unit sales base that is 1/3 the level of 2005 and declining now.

12 thoughts on “CensusBureau.con

  1. Nearly all US statistics have become a gigantic fraud. The ethical downturn of the US is beyond believe. It hurts to see this country going down like a piece of shite.

  2. Dave,

    Forgive me and this comment, if you need to flame me go ahead, but your talk of the homebuilders and manipulation/things not being mathematically possible strikes the same note as similar discussions on gold and silver and fraudulent Comex/manipulations, etc.

    Why the hell would I want to go short this market if they can massage numbers for longer than I could stay solvent?

    In the same light, why would I want to go long gold?

    I ask these questions sarcastically of course, because I am long physical gold and silver, but really, the timeframes discussed by you and others over the years have all failed, pretty much without exception, to materialize. Why is 2014 (or 2015 or 2016) going to be any different?

    My intention is not to be “right” or on the “good” side of all this potential manipulation, but rather on the profitable side and not on my deathbed wondering how they kept it going so long.

    I have a feeling many people, once they have kids (like me) in their 30s/40s/50s start questioning government and policies, and if we were to go back 40 years to the oil crisis or Vietnam, or the cold war, or inflation — that each of those events and others were going to spell the demise of the US, but we keep on chugging along.

    And of course, this time is different, right? This time the debt is “really” unsustainable… why do I think the same stuff was spouted about something or other every decade, probably since the time of the Romans?

    Regards,

    Mike

    1. Despite the manipulation of the numbers from both the NAR and the CB, the homebuilders have been going down since May 2013. There’s nothing they can do to prop up the homebuilder stocks. The last 18 months of negative returns vs. the SPX prove that.

  3. Dave, one (of many) reasons we can dismiss the Census Bureau’s home inventory reduction the widespread nonreporting by banks of their growing heap of repossessions.
    Gold and gold stocks look to benefit from the systemic dystopia, at the same time mainstream media is bifurcated and convulsing.. As end-of-quarter “book-squaring”, Comex options expiry(done) and First Notice Day for delivery are past, all overgeared markets will clash and screech louder than Grandma Yellen, Christine Lagarde or the latest upstart can ever preach. Above all, market actions speak louder than words.

  4. Wow! Impressive numbers from the Census Bureau!
    Let’s look at their data for Aug. 2014 released today at their website:

    1) Seasonally Adjusted (SA) New House Sales
    Aug. 2014: 504k, annualized, SA – This is an amazing number, but is statistically massaged (or tortured, if you prefer).
    Aug. 2013: 379k, annualized, SA – YoY comparison.

    Note that interest rates started spiking up in Jun. 2013, and so not hard to beat these numbers.

    2) Non-Seasonally Adjusted (NSA) Sales:
    Aug. 2014: 31k, NOT annualized, or seasonally adjusted
    Aug. 2013: 41k, NOT annualized, or seasonally adjusted

    So, 10k actual additional units sold YoY. No statistical adjustment.

    There are lies, damned lies and statistics.” – Mark Twain

    It appears that every gov’t. agcy. is now politicized, including the Census Bureau, and mid-term elections are coming up in Nov. I wouldn’t be at all surprised if the Aug. New House Sales report (SA numbers) was drastically revised lower at some point, after Nov. of course…

    http://nypost.com/2014/09/19/representatives-are-blind-to-the-census-bureau-case/

    There is no way realistically that US house sales, new or otherwise, are improving right now. Anecdotal evidence points to the contrary. The Emperor has no clothes. 🙂

    1. Correction:
      Sept. 2013 NSA: 31k
      Sept. 2014 NSA: 41k
      Showing 10k units increased sales in the YoY period. Whoopee!
      Update:
      Note on Census Bureau.
      There are two cases (at least) that I’m aware of where CB is accused of “cooking the books.” 1) Questionable employment data right before 2012 election, and 2) Questionable enrollment data/change in survey method (read stats. manip.) during critical eval. period for ACA/Obamacare enrollment earlier this year.

      There are very few gov’t. entities that are not now heavily politicized. Maybe the National Weather Service is safe as they haven’t figured out how to change the weather yet… 🙂

      See links, below:

      1) http://nypost.com/2014/09/24/congress-dropping-the-ball-on-census-bureau-oversight/
      2) http://www.powerlineblog.com/archives/2014/04/the-lies-obamacare-census-bureau-edition.php

      My point is that if there are allegations/evidence of book cooking at the CB on these two politically charged issues, then why not the same for an economically important number such as new house sales? Who do you trust at this point? The current new house sales data looks very suspicious based on other related data. Just look at recent Gallup polling results on this topic. Trust in gov’t. is low and moving lower. Not just my view here.

  5. There was a time not so long ago that I thought criminals running American
    government would realize they are in a no win situation and try to deescalate the
    bullshit but instead have decided to double down and then double down again.
    Their desperation is now so obvious for all to see that we must be getting close
    to the point when they lose control and then we all pay for their malfeasance.
    Tar and feathers….

    t

  6. So Dave… What you’re saying is that the hacks at the CB shut down the porn for the last five minutes of the day and had to make up shit that would stick to wall for the MSM? As for the builders, they are not really builders. They input shit into their computers, time, materials and the cheapest hacks they can get. I started In the trades in 90. No computer nationwide hacks back then. 98 was about the death bell for any decent local home builder. What I do love in this hobo economy is my Milwaukee radio and that I can play my Dead mp3’s. I did discover pandora and the Phish station. It so puts me in the mood to create art. Like you do daily… You rock. Bitch. LoL

  7. Recently was discussing housing with a small bank mortgage director (personal friend)… Their market (North Central Ark and southern MO) has a staggering amount of for sale inventory and very low loan origination rates. Beautiful country, reasonable services, low cost housing, low taxes, clear water lakes, streams and mountains… a retirement paradise… very low sales rate for the last 2+ years.

    Problem? The for sale properties were mostly bought up by people moving into the area for retirement purposes at the height of housing prices. They are wanting to downsize but have too much into their homes and are in a position to not “Have” to sell unless they can get their price…Soo they continue to leave on the market hoping the “acorn” the blind hog finds will be theirs. These folks are continuing to age and their properties will eventually be reduced to sell. Kind of reminds me of the investor/ flippers that are too deep in and hoping to ride out the storm by renting properties out… At some point reality will set in (we can at least hope) and a flood of shadow inventory will hit the market driving prices into the abyss…

    1. Thanks and that’s great color. I’m am hearing similar reports from all over the country and seeing it
      first hand in Denver. A common sight now in Denver is to see a block with at least 1 or 2 homes for sale
      and one for rent.

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