Wednesday, February 24, 2010

As the Snow Fell, Single-Family New Home Sales Fell

I note some other sites are hyperventilating over the 11.2% drop in January new home sales. I am not bullish on the economy, but this number is of zero value in providing insight into what is going on in the economy.

Although heavy snow hit the U.S. in February, January was no time to picnic in the U.S.

According to the National Oceanic and Atmospheric Administration
National Climatic Data Center:
At the beginning of the month, snow was present for approximately 61 percent of the contiguous United States, including the Sierra Nevada Mountains, Cascade Mountains, Great Basin, Intermountain Rockies, northern and central Plains, the Great Lakes, Northeast, Mid-Atlantic, and Southern Appalachians. Winter storms during the month added to existing snow cover and increased snow cover extent across the country. At the end of January, 69.7 percent of the U.S. was under snow cover with the addition of the southern Plains, Tennessee River Valley, Ohio River Valley, and parts of the Southeast.
People don't buy houses when snow prevents them from driving to look at houses. In January, there was a 14.2% increase in snow cover across the U.S. Further, a lot of the January snow was in more southerly parts of the U.S., where the drivers aren't as comfortable driving with snow on the roads, especially since snow plowing efforts in the south take onger to clear roads.

I have already pointed out Floyd Norris's warning about the February jobs number. This housing number is pretty much along the same line. As a matter of fact, any January or February economic numbers, that can be impacted by snowfall, should just be tossed this year. They are of zero use in attempting to understand trends in the economy.

Wenzel's Observation #3: When you have an El NiƱo year, combined with a year of a strong negative Arctic Oscillation, toss out the January and February economic data.

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