Real e Finance means business
Rumors of
Housing's Rise
From the Dead
Are Greatly
Exaggerated
Dec 20, 2011
Housing's Rise
From the Dead
Are Greatly
Exaggerated
Dec 20, 2011
Housing starts for November were released today, December 20th, and the
stock market rallied strongly on the supposedly "good" news. The statistical
error rate in the housing report is so huge, that the numbers are
meaningless -- and easily subject to manipulation by a government that is
desperate to provide news of a recovering economy.
Housing starts peaked at 2,273,000 in January 2006. According to the
Commerce Department, construction of new U.S. residences in November
2011 was 635,000. Almost five years later, housing activity is still less than
28% of what it was at the peak. Despite this almost three-quarters decline
in housing activity, this is being spun as evidence of an economic
recovery by the mainstream media. Would you consider it progress if your
salary was only 28% of what is was five years ago?
As dismal as this statistic is, it is very possible the actual number is much
worse. The housing starts report has the highest statistical margin of error of
any government report. The error is so huge that is a waste of taxpayer
money to produce this report. The error in the overall number can be
greater than ten percent. The error on individual components can be as
much as 33%. This is important because better housing start numbers in
2011 (November was not the first month when better numbers were
reported, this took place earlier in the year as well), have been created by
a supposed surge in apartment house construction. Apartment
construction rose by 25.3% in November and this is what is making the
overall number higher. Considering the huge statistical error rate, it is
possible that it didn't rise at all.
Optimists who think it did rise by that much need to ponder the
implications of why a lot of apartments are being built and very few
single-family houses. The inescapable conclusion is that few Americans
can afford to buy their own home anymore. I would hardly describe that as
an indication of better economic conditions. Even more telling is that the
number of completed housing units dropped by 5.6% in November even
though housing starts rose earlier this year. If this is correct, a lot of housing
that is begun is not being finished. While that makes no sense, nothing else
about the report does either.
Disclosure: None
Daryl Montgomery
Author: "Inflation Investing - A Guide for the 2010s"
Organizer, New York Investing meetup
stock market rallied strongly on the supposedly "good" news. The statistical
error rate in the housing report is so huge, that the numbers are
meaningless -- and easily subject to manipulation by a government that is
desperate to provide news of a recovering economy.
Housing starts peaked at 2,273,000 in January 2006. According to the
Commerce Department, construction of new U.S. residences in November
2011 was 635,000. Almost five years later, housing activity is still less than
28% of what it was at the peak. Despite this almost three-quarters decline
in housing activity, this is being spun as evidence of an economic
recovery by the mainstream media. Would you consider it progress if your
salary was only 28% of what is was five years ago?
As dismal as this statistic is, it is very possible the actual number is much
worse. The housing starts report has the highest statistical margin of error of
any government report. The error is so huge that is a waste of taxpayer
money to produce this report. The error in the overall number can be
greater than ten percent. The error on individual components can be as
much as 33%. This is important because better housing start numbers in
2011 (November was not the first month when better numbers were
reported, this took place earlier in the year as well), have been created by
a supposed surge in apartment house construction. Apartment
construction rose by 25.3% in November and this is what is making the
overall number higher. Considering the huge statistical error rate, it is
possible that it didn't rise at all.
Optimists who think it did rise by that much need to ponder the
implications of why a lot of apartments are being built and very few
single-family houses. The inescapable conclusion is that few Americans
can afford to buy their own home anymore. I would hardly describe that as
an indication of better economic conditions. Even more telling is that the
number of completed housing units dropped by 5.6% in November even
though housing starts rose earlier this year. If this is correct, a lot of housing
that is begun is not being finished. While that makes no sense, nothing else
about the report does either.
Disclosure: None
Daryl Montgomery
Author: "Inflation Investing - A Guide for the 2010s"
Organizer, New York Investing meetup
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Economics Investing
Guide' is meant to help
educate people on
how investing choices
in the current
economic
environment. We have
coined this term to
describe the current
monetary and fiscal
policies of the U.S.
government, which
involve unprecedented
money printing. This is
the official blog of the
New York Investing
meetup.
Economics Investing
Guide' is meant to help
educate people on
how investing choices
in the current
economic
environment. We have
coined this term to
describe the current
monetary and fiscal
policies of the U.S.
government, which
involve unprecedented
money printing. This is
the official blog of the
New York Investing
meetup.
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