Don't Buy This Housing Report - TheStreet

Don't Buy This Housing Report

The data showed improvement, but context showed the statistics' flaws.
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Together, our weary eyes have seen a lot of bad business reporting. But the work we saw on Tuesday's housing data might take the poisonous cake.

Don't be misled into buying housing stocks like

Toll Brothers

(TOL) - Get Report

,

KB Home

(KBH) - Get Report

,

Pulte Homes

(PHM) - Get Report

or

Home Depot

(HD) - Get Report

, which showed signs of life on the strength of these epically dumb headlines. Your portfolio deserves better.

Here is a representative sample, a headline atop an

Associated Press

article: "

New home sales rise unexpectedly in April

."

Long awaited great news! A housing surprise on the upside! We haven't seen one of those since pretty much forever. The April new-home report, comparing new-home sales to March, is called "upbeat" in the subheadline and the lead trumpets the number as the first increase in six months and, for good measure -- in case you missed the point -- termed it "unexpected."

They Just Don't Get Home Sales!

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Unexpected is right. Undeserved too. Take even a passing glance at the

joint news release

from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development and you'll see just how undeserved it is.

Guess what? The very first paragraph will turn you from unexpectedly upbeat back into a Gloomy Gus. Why? Well for the very simple reason that you'll be told that the March figures were revised downward. Got that? April was up because March was down. April earned those excited headlines about being better than expected, in large part because March was worse than first thought.

And were there mentions in this journalistic effort that these April numbers could, like the March ones, be revised down too? You didn't really ask that, did you? Such guarded and legitimate caution in the service of you, the savvy investor, would step on those excited headlines.

To put the April results in further perspective, just realize that they were 42% lower than the previous April.

The Associated Press

went on to make a bad headline worse. The

Dow

was up a grand total of just under 69 points for the day, which comes out to a statistically insignificant 0.55%. But one person's statistical insignificance is, of course, another's opportunity to weave a story line that will further mislead investors, by linking the housing numbers to this vaunted rise.

Here is the offending headline: "Stocks end day up amid good housing news."

In the lead we again hear about that "unexpected gain" not the zero sum nature of the increase, and we are then told how it "encouraged investors to put money back into the market." To the tune of, uh, 0.55%. Break out the bubbly.

Further down, the issue is spelled out in more detail: "Investors were also somewhat reassured after the Commerce Department said sales of new homes rose 3.3 percent in April to a seasonally adjusted rate of 526,000 units."

Compare this nonsense to a good effort from

Bloomberg

, one that does not confuse and mislead investors. The

Bloomberg

headline: "

HOUSING WOES SAP CONFIDENCE

."

We are told right in the lead that "the two-year housing slump showed no sign of bottoming." That's a far cry from the implicit assumptions of the unexpectedly upbeat reports that helped take the stock market higher in the other reports, huh? And just in case you still don't get it,

Bloomberg

spells it out:

"Sales of new homes increased 3.3 percent in April after readings for the prior month were revised lower, the Commerce Department's report showed."

If I didn't know better, The Business Press Maven would say that

Bloomberg

read the original, government issued press release that carried the numbers, while

The Associated Press

didn't bother to.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;

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