Tag Archives: Census Bureau

Housing Starts? Census Bureau Reporting Reaches New Level Of Absurdity

Census Bureau definition of a housing “start:”   Start of construction occurs when excavation begins for the footings or foundation of a building.  Census Bureau

The Shadow of Truth did an interview with NY Post report John Crudele, who is the journalist who caught the Census Bureau fraudulently reporting employment data:  The Unemployment Rate In And Of Itself Is A Joke.

Crudele and the NY Post currently have six Freedom of Information Act requests with Census  Bureau, to which the CB refuses to respond or hand over documents.  Some of them are more than a  year old.  If the Census Bureau/Government does not have any foul play to hide, then why not respond the to the FOIA requests and dispel all doubt?

With this as the context, I think its safe to say that it is highly likely that the CB data with respect to housing starts is wildly inaccurate, especially in light of the collapsing price of lumber:

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In fact, when you examine the Census Bureau-generated “housing starts” number vs. the market price of lumber, the Census Bureau data has no credibility (source: Zerohedge, edits are mine):

20150519_starts2The fundamental economic data as measured by the market does not support the data being reported by the Census Bureau. If housing starts were flourishing, the demand for lumber from new homebuilders would be pushing the price of lumber higher.

Given that we know the Census Bureau has been fraudulently reporting employment data, it is highly probable that the Census Bureau’s data collection and reporting process with respect to housing starts and new home sales is corrupted.

As you can see from the way in which the Census Bureau defines a “housing start,” all that is required to be counted is basically any homebuilder sticking a shovel in the ground of a piece of property with an authorized building permit.   The CB has stated that if it can’t collect data on new home sales in certain regions, it will “estimate” the number of new home sales based on housing permits filed.  I would suggest the same absurd technique is utiltized with respect to “collecting” data on housing starts.

Regardless of whether the number reported today by the Census Bureau reflects any remote semblance of reality, if homebuilders are indeed building more homes, the result will be little more than the continued pile-up of homebuilder inventory.

In fact, as I’ve shown in my homebuilder research reports, new homebuilders have amassed a record level of inventory.  This inventory is piled on top of a unit sales run-rate that is roughly 1/3 the peak level of sales in 2005.

The question is, in the context of the rate of homeowership in ths country continuing to plunge to multi-decade lows, the continued lack of participation in home sales by the first-time buyer, and a massive pile-up on in high-end inventory, who in the hell is going to buy all of these supposed new homes being built?

SoT Ep 27 John Crudele: “The Unemployment Rate In And Of Itself Is A Joke”

I think the stock market is rigged and I don’t think anybody argues with that anymore.  In 2009 when Goldman Sachs is speaking with the Treasury Secretary – and I have the phone logs –  more times in one day than Treasury Secretary Paulson talks to the Federal Reserve, I have to figure these guys are up to something you know they’re not making vacation plans – they’re doing something. And then when the phone call is just a half an hour before some major rally in the stock market – all documented – then I have to figure they’re up to something.  – John Crudele, Shadow of Truth

Our friend and colleague Bill “Midas” Murphy (GATA, LeMetropole Cafe) hooked us up with John Crudele, business reporter/columnist for the NY Post.  For those of you who do not read the NY Post or have not heard of him, John Crudele is one of the very few reporters who is willing to look for and report the truth.   He’s been a journalist for 40 years, with time spent at the New York Times, New York Magazine, LA Times, Washington Post and, the last 25 years, with the NY Post.

Right now we have a job market that is not doing great but it’s doing better than the economy as a whole…either there’s something we’re not understanding correctly or the numbers are wrong

John was the journalist who exposed fraudulent Census Bureau data reporting in the Bureau of Labor Statistics nonfarm payroll report  (the Census Bureau collects the data). He discovered that one of the Census Bureau’s regions was fabricating 100’s of data collection reports.

If someone is screwing around with those numbers (employment data), then the numbers are going to be wrong…we found there were some cushy deals with politicians in six States.

Crudele and the NY Post currently have SIX Freedom of Information requests into the Census Bureau for which the Census Bureau refuses to answer or turn over documents. Some of the requests are more than a year old.

Many of you are familiar with the JOLTS report (Job Openings and Labor Turnover).  It measures the alleged number of job openings in the United States on a monthly basis. But just like the nonfarm payroll report, this report is egregiously misreported by the Government.

One of Crudele’s readers emailed John and explained to him that every time someone puts in a bid for a Goverment contract, they report those jobs as job openings. But every contractor that puts in a bid on the same contract also reports those jobs as job openings. On the job bid that John’s reader referenced, 20 contractors submitted jobs, which means that 2,000 job openings were reported although only 100 true job openings were going to be produced by the Government contract.  The JOLTS number, in other words, has no bearing on the true number of job openings.

We hope you take the time to listen to this engaging and lively interview with John Crudele.  His commentary is infused with lively New York-style sarcasm and humor.  Chatting with him made me long for a slice of NY pizza or an all-beef hot dog with spicy mustard and kraut from Papaya King, although John informed us his standard fare is one of the NYC dirty water dogs from a stand outside his building. We think you’ll find it refreshing to hear from a journalist who has the guts to stand up for reporting the truth:

Housing Permits, Starts Tank – SoCal November Home Sales Plunge

Closing market update:   Homebuilders were down 1-2% across the board.  HOV was down over 6%.  The company in my latest report was down over 2%.   Anyone who bought my report when it was first posted is now up almost 10%.  Shorting just 100 shares would have paid for the cost of my report my more than 2x.  I think there’s still another 8-10% of downside before any bounce…

Let’s start with real market data before we tackle and Un-Spin the Census Bureau vomit. Home sales in Southern California dropped to their lowest level in 7 years for the month of November.   They plunged 19% from October to November. Since 1988, the average decline from Oct to Nov is 8%.  This is actual transaction data and not estimated, adjusted and annualized drool coming from the Government or a real estate pimp organization like the NAR.  Here’s the LINK.

As for today’s housing starts/permits data for November from the Census Bureau.  The highly polished headlines reported that housing starts were down only 1.2% from October, with permits down 5.2%.  HOWEVER, please note that this is “seasonally adjusted and annualized” rates.  We have no idea what kind of absurdities are built into the “seasonal adjustments.”

BUT, if you look at the unadjusted data for November 2014 vs. November 2013, you find that actual starts dropped 7.5% and permits were down 5.5%.   This is the cleanest way to look at the numbers because it eliminates Census Bureau statistical manipulation and it is is not an annualized rate.  Note:  to the extent there’s errors in the “seasonal adjustments,” annualizing the number compounds that error by a factor of 12.  Here’s the data link from the Census Bureau if you want to see what I’m looking at:  LINK

The homebuilder stocks are going lower.  You can ignore reality, but you can’t ignore the consequences of reality. Despite 30-yr mortgage rates below 4% and a slight easing of FNM/FRE credit standards, mortgage purchase applications and sales are dropping.  Here is the link to my latest homebuilder short-sell report:  This stock is already down over 8% since I first published the short-sell recommendation on December 4th.  It’s going lower.  I would short the bonds too if you can locate a borrow.

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Don’t take it from me, here’s some actual market data from around the country (sourced from The Housing Bubble Blog):

Orlando:    Orlando-area home sales have slowed, the inventory of house listings is up, houses are taking longer to sell and sellers have less negotiating power than they did a year ago, according to a report.

Boston:   Everyone knows that the Luxury Glutpocalypse has hit Greater Boston: too many new higher-end apartments, too few tenants for them, and a lot of gobsmacking incentives to try and right the market ship. You can see that the decreases have been steepest in areas that have seen some of the briskest development of luxury apartments (Back Bay, downtown Boston, Chinatown).

Minneapolis/St. Paul:   A sluggish November for home sales and stagnant fall inventory has given buyers the upper hand in the Twin Cities housing market. ‘There’s kind of a hangover of inventory from the fall that isn’t selling.

Housing market guru, Robert Shiller:   “Historically, houses have not done well as investments. They haven’t really gone up much in value in the last 100 years. And on top of that, they’re a nuisance,’ he said. ‘You have to take care of them.”

The zero-interest policy of the U.S. Government/Fed has caused a massive misallocation of capital into a massive oversupply of rental buildings (I see this all over Denver) and single-family homes.  All of the homebuilders for which I have published research reports have loaded up their inventory with spec homes and have used mostly debt to finance the binge.

The next event will a massive “purge.”  Take advantage of the purge by shorting these homebuilders before every hedge fund out there looking for positive short-side alpha jumps on this trade.  You can access all my homebuilder short reports here:   Short The Homebuilders.

This is a volatile sector but there’s a lot money that can be made with prudent capital management and use of calls and puts to help manage the volatility.  All of my reports have a section which discusses both capital management/trading and options strategies.

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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.