Monday, August 27, 2007

The Housing Depression is not over yet - Part VI

The headline used by the mass media, burdened with an insatiable need to oversimplify everything they touch:

New-home sales rise 2.8% to 870,000 pace in July

Reason number 6 you should ignore the headline - price does not reflect concessions.

The Commerce Department reported a slight increase in the median price to $239,500.

Builders don't like to lower prices, they usually throw in free upgrades or give away consumer items to buyers. At this point in the cycle, they may have no choice since they have bills to pay, but the Commerce Department has no way to measure the concession and admits it in its survey documentation

"The sales price used in the survey is the price agreed upon between purchaser and seller at the time the first sales contract is signed or deposit made. It includes the price of the improved lot. The sales price does not reflect any subsequent price changes resulting from change orders or from any other factors affecting the price of the house. Furthermore, the sales price does not include the cost of any extras or options paid for in cash by the purchaser or otherwise not included in the original sales price reported."

No comments: