The sales of new homes soared in March.
That, anyway, is the message you would have gotten from any of the stories last week that followed the government’s report of a 26.9 percent jump in new-home sales in March.
That’s how much the market increased compared with the same month in 2009.
The new-home sales seemed even better when this March was compared with February, the month before. Take away statistical adjustments, and the February to March improvement was an incredible 52 percent.
Watch out, it’s a boom!
And that’s just the way every media organization treated the news. Most reports cited the fact that an $8,000 government tax credit to purchase a home — new or resale — is about to expire.
But take a look at the March figures in light of other years.
If you ask the government — and you do have to ask — it will tell you that 38,000 new homes sold this March.
The 38,000 figure is, in fact, a lot better than the 31,000 new homes sold in March 2009, when most people were in hiding under their sofas and waiting out the financial tornado.
But this March’s figure is not even close to a healthy number when you look back on new-home sales throughout history during March, a month that most realtors consider an important kickoff to the selling season.
Here are some numbers.
If you remember, the housing market wasn’t any great shakes back in March 2008. But 49,000 new homes were still sold then.
Going backwards, there were: 80,000 new homes sold in March 2007; 108,000 in March ’06; 127,000 in March ’05 and 123,000 in March of ’04.
Heck, you’d have to go all the way back to the early 1980s to find a March with new-homes sales at the 30,000-level. And back then, the economy was a mess and mortgage rates were in the double-digits.
There was no special tax incentive back then luring people to buy houses, except the traditional mortgage deduction on tax returns. And people who wanted to buy a house in the 1980s actually had to scrimp and save to come up with the 20 percent or so down payments.
So, what’s my point?
Yesterday, the Federal Reserve said once again that it would keep interest rates at “exceptionally low levels” for an “extended period of time.” It also said the economy had continued to improve but growth was “likely to stay moderate.”
That seems like a pretty fair estimate of what is going on right now.
So if you read outrageous stories like the one on new-home sales, remember the old adage: “If it sounds too good to be true, it’s probably just the media not doing its job.”
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What are the potential problems for the economy today? There are really too many to list here, but they include:
1. A stock market that’s been rising too quickly. Aside from Tuesday’s selloff because of economic problems in Europe, stock prices have been rising too rapidly and without any connection to real economic conditions.
2. Yes, corporate profits have been improving. But most of the improvement has come from cost cutting and not revenue gains. This can’t continue forever.
3. Job gains in the economy have been minuscule. And if companies continue to focus on their profits — and keeping Wall Street analysts happy — they aren’t likely to spend on new workers.
Some people like to applaud an economic recovery even if it is jobless. A jobless recovery is like trying to build a house without a first level. You might end up having something to look at, but you probably won’t want to live with the results.
4. Debt, debt and more debt.
With the world, including the US, owing so much money for houses that aren’t being lived in, stuff we really didn’t need and government programs that suck taxpayers dry, interest rates could start rising at the slightest sign of a real — or even imagined — improvement in the economy.
Financial reform is coming, like it or not. I like it. But as with all things, too much of a good thing isn’t necessarily good.
The financial industry made lots of money, lots of mistakes and generated lots of corruption.
Here’s what I’d do:
Derivatives? Regulate them so we know what financial institutions are up to. And make information on trades public, whether by doing them on an exchange or in some other way.
Commodities? Don’t let financial firms trade commodities without oversight. What they’ve done to oil futures, for instance, has had a major impact on consumer ex penses in the past few years and has hurt the economy.
Banks? Let them stay in some of the “new” busi ness permitted since the industry was deregulated in the late 1990s. But if bank execs screw up again and start reporting losses, close these institutions down and investigate the executives for malfeasance.
Crooks? The financial industry is about lots of money and that automatically breeds criminal behavior. But severe punishment should be handed out to anyone caught defrauding investors.
Let’s use the Bernie Madoff rule. If bankers get caught doing something wrong, their lives and those of their family will be ruined. john.crudele@nypost.com