NEW RESIDENTIAL SALES

Table of Contents

II. Definitions

III. Source of Data and Survey Questionnaire

IV. Geographic Coverage

V. Sample Design

VI. Compilation of Data
VI.a. Methodology used for data through 1998
VI.b. Methodology used beginning with 1999 data
VI.c. Adjustments for non-reporting

VII. Reliability of Data
VII.a. Sampling errors
VII.b. Non-sampling errors

VIII. Seasonal Adjustment

I. PURPOSE

II. DEFINITIONS

New Residential Sales

New Houses Sold

New Houses For Sale

Months' Supply

Sales Price

The median sales price is the sales price of the house which falls on the middle point of the total number of houses sold.  Half of the houses sold have a sales price less than the median and half have a greater price. A full write up of the methodology used for medians can be found here.

The average, or arithmetic mean, sales price is obtained by dividing the sum of all the sales prices reported by the number of houses reporting a sales price.

Median Months For Sale

Housing Unit

Attached and Detached Housing Units

"HUD-code" Manufactured (mobile) Homes

Type of Financing

The FHA and VA type-of-financing data presented in this report tend to differ from those published directly by those agencies. For the actual number of FHA-insured and VA-guaranteed loans made for new houses at the time of final settlement, refer to the publications of the respective agencies. The data differ because of the difference in time periods between the signing of the original sales contract, the start of construction, and the insurance or guarantee of the mortgage, as well as the sampling variability in this survey.

Early in 1995, the Farmers Home Administration was reorganized. As part of this reorganization the Rural Housing Service now handles the mortgage functions formerly done by the Farmers Home Administration.

Regions

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III. SOURCE OF DATA

The Census field representatives use interviewing software on laptop computers to collect the data. Facsimiles of the computer-based questionnaires are provided to respondents to familiarize them with the survey. These facsimiles show the questions that are asked for housing units in single-family buildings Form SOC-QI/SF.1 and in multiunit buildings Form SOC-QI/MF.1.

IV. GEOGRAPHIC COVERAGE

For more geographic information, please refer to our definitions of Regions.

V. SAMPLE DESIGN

Housing Units Authorized, but Not Started; Housing Starts; Housing Units Under Construction; Housing Completions; Housing Sales; and Characteristics of New Housing

V.b Sample design for 2004 and earlier is as follows:

The sample design for the Survey of Construction is a stratified multistage cluster design derived from the Current Population Survey (CPS), 1980 design. Each state was divided into areas made up of counties (towns in New England) and independent cities. These areas were grouped within each state to form strata for the CPS according to metropolitan status and 1980 labor force, race/ethnic origin, population change, and family and housing characteristics. One area from each of the strata was selected with probability proportional to the number of persons 16 years of age and older. The CPS strata were further stratified into 169 strata according to Census region, metropolitan status, building permit activity in 1982, population, and the percent of the population in areas which do not issue permits. One of the CPS selected areas was chosen from each of these 169 strata with probability proportional to the number of persons 16 and older.

Within each of these 169 areas, the sample was selected from two different sample frames: permit-issuing places and land areas not covered by building permit systems.

Each permit-issuing place was assigned to one of six size classes based on a weighted average of 1978, 1981, and 1982 permit activity. The two most recent years available for the SOC redesign, 1981 and 1982, were unusual because of recession. Future activity was expected to return toward the pre-recession distribution. It was thought that averaging 1981 and 1982 with 1978 would include this tendency to return to the pre-recession distribution but also reflect a permanent change in the distribution of activity due to the changes in the economy. The activity levels were standardized by dividing by the US activity for each year because the activity levels were quite different in the three years. The permit places in each of the 169 areas were grouped into these six size classes and a systematic sample of places was selected from each size class. Places were selected at different sampling rates in each of the classes so that larger proportions of the places were selected from the larger size classes. For example, all places in the largest size classes fell into sample, but only an expected 1 in 40 of the places in the smallest size class fell into sample. Approximately 840 permit-issuing places were selected. Due to splits and mergers of local permit systems, there are now about 900 permit offices in the Survey of Construction.

Monthly, Census field representatives sample permits from these 900 permit-issuing places. They select permits for one-to-four-unit buildings with probability proportional to the number of units at an overall rate of 1 in 40. All permits for buildings with five units or more are selected.

Within each of the 169 areas, the land not covered by building permit systems, called nonpermit areas, was identified. Small land areas (1980 Census enumeration districts) in these nonpermit areas were grouped into two strata according to the 1980 population. Overall, 1 out of every 120 land areas was selected from the strata with the larger areas and 1 out of 600 was selected from the strata with the smaller areas. Monthly, census field representatives canvassed about 130 selected land areas looking for all housing units started.

In January 1995, the area covered by building permit systems was expanded to 19,000 permit-issuing places. Canvassing was stopped in those selected land areas now represented by permit-issuing places. Census field representatives continue to canvass about 70 land areas still not covered by building permit systems. Due to the small amount of new construction activity, many areas are now only canvassed once every three months.

V.c Statement about the Possible Impact on New Home Prices and Characteristics due to the Survey of Construction Sample Change

Effective with the January 2005 data release, the Survey of Construction implemented a new sample of building permit offices from which sampled houses are selected. The sample of permit offices was redesigned to reflect the location of building permit activity in the past few years, replacing the previous sample selected in 1985. The selection of the approximately 900 permit offices in the new sample was designed to optimize the precision of the housing starts estimates. No attempt was made to select offices representing geographic areas with similar housing prices and characteristics as the old sample. As a result, data users should use caution when analyzing year over year changes in housing prices and characteristics between 2004 and 2005. It may be possible, for example, that many jurisdictions in the 1985 sample are more built up now, remaining land may be more expensive, remaining lots may be smaller, etc. These jurisdictions may have been replaced in the new sample with more outlying areas that are now actively issuing building permits. In these locations land may be more abundant, lot sizes might be larger, and sales prices possibly lower. It is important to note that estimates from the old and new samples are both statistically correct. The actual values that we are trying to estimate fall within intervals that can be calculated from the sample data with known probabilities. For example, when we publish an estimate with a relative standard error (RSE) of 5%, there is a 90% chance that the true value is within "8% (statistically defined as 1.6 times the RSE) of the estimate.

VI. COMPILATION OF DATA

VI.a. Methodology Used for Data Through 1998

The compilation of the new home sales series was a multistage process. First, an estimate was made monthly of the number of housing units for which building permits were issued in all 19,000 permit-issuing places as described above.

Second, for each permit selected in the 900 permit-issuing places, an inquiry was made of the owner or the builder to determine if the house was already sold or was for sale.  If already sold, the month and year the house covered by the permit was sold was obtained. In case the house authorized by a permit in a particular month was for sale, follow-ups were made in successive months to find out when the unit was actually sold.

Ratios were calculated of the number of houses sold to the number of houses covered by permits based on estimates generated from the 900 SOC permit offices. Separate ratios were calculated for houses sold from permits of that month and of each preceding month for the past 7 years. These ratios, or sales rates, were then applied to the appropriate estimate of the number of houses authorized by permits, based on the Building Permits Survey, in the corresponding months to provide estimates of the number of houses sold for each month of authorization.

Having produced estimates of the number of houses sold with permit authorization, two additional adjustments were made. An upward adjustment of 3.3 percent was made to the number of houses started to account for those units started within permit-issuing areas but without permit authorization. (A study spanning a four year period during the mid 1960s indicated that permits were obtained for all buildings with two housing units or more.)

The estimates for housing units sold in the 19,000 permit-issuing places resulted from the procedures outlined above.

Third, units identified as sold in the monthly canvass of nonpermit areas were weighted appropriately to provide an estimate of total houses sold in areas not covered by building permit systems.

Adding this estimate of houses sold in nonpermit areas to the estimate of houses sold in the 19,000 permit-issuing places resulted in an estimate of total private houses sold.

Adjustments are made to account for those houses sold prior to permit authorization and for late reports. These adjustments are applied by stage of construction based on historical patterns of pre-permit sales and late reports. An outlier procedure is used to adjust for extreme values in the history. No adjustment is made for units in permit areas built without a permit.

This same methodology was also used for the estimates of houses for sale.

The procedure described above was done by region.  Eight sets of sales rates were used: separate sets of rates for metropolitan and nonmetropolitan areas within each of the four regions. 

VI.b. Methodology Used Beginning With 1999 Data

The compilation of the new home sales series is a multistage process. First, an estimate is made monthly of the number of housing units for which building permits are issued in all 19,000 permit-issuing places as described above.

Second, for each permit selected in the 900 permit-issuing places, an inquiry is made of the owner or the builder to determine if the house was already sold or is for sale.  If already sold, the month and year the house covered by the permit was sold is obtained. In case the unit authorized by a permit in a particular month is for sale, follow-ups are made in successive months to find out when the unit is actually sold.

Ratios are calculated (by type of structure) of the number of units authorized by permits, based on the Building Permits Survey to the number of units authorized by permits based on estimates generated from the 900 SOC permit offices; separate ratios are calculated for that month and the prior 11 months. The 13th through 18th month back are summed and a ratio is calculated and all months from 19 months back through 60 months (5 years) are summed to get another ratio. These ratios are then applied to the appropriate estimate of the number of houses sold, based on the 900 SOC permit offices, in the corresponding months or groups of months to provide ratio adjusted estimates of the number of houses sold for each month or group of months.

Adjustments are made to account for those houses sold prior to permit authorization and for late reports. These adjustments are based on historical patterns of pre-permit sales and late data. No adjustment is made for units in permit areas built without a permit.

The estimates for houses sold in the 19,000 permit-issuing places result from the procedures outlined above.

Third, houses identified as sold in the monthly canvass of nonpermit areas are weighted appropriately to provide an estimate of total houses sold in areas not covered by building permit systems.

Adding this estimate of sales in nonpermit areas to the estimate of sales in the 19,000 permit-issuing places results in an estimate of total private houses sold.

This same methodology is also used for the estimates of houses for sale.

The procedure described above is done by region.  Four sets of sales rates are used: separate sets of rates within each of the four regions.

VI.c. Adjustments for Non-Reporting of Characteristics

VII. RELIABILITY OF DATA

VII.a. Sampling Errors

Estimates of the standard errors have been computed from the sample data for selected statistics in this report. They are presented in the tables in the form of average relative standard errors. The relative standard error equals the standard error divided by the estimated value to which it refers.

The sample estimate and an estimate of its standard error allow us to construct interval estimates with prescribed confidence that the interval includes the average result of all possible samples with the same size and design. For example, suppose the New Home Sales table showed that an estimated 70,000 houses were sold in a particular month. Further, suppose that the average relative standard error of this estimate is 3 percent. Multiplying 70,000 by 0.03, we obtain 2,100 as the standard error. This means that we are confident, with 2 chances out of 3 of being correct, that the average estimate from all possible samples of houses sold during the particular month is between 67,900 and 72,100 houses. To increase the probability to about 9 chances out of 10 that the interval contains the average value over all possible samples (this is called a 90-percent confidence interval), multiply 2,100 by 1.6, yielding limits of 66,640 and 73,360 (70,000 houses plus or minus 3,360 houses). The average estimate of houses sold during the specified month may or may not be contained in any one of these computed intervals; but for a particular sample, one can say that the average estimate from all possible samples is included in the constructed interval with a specified confidence of 90 percent.

Ranges of 90-percent confidence intervals for estimated percent changes are shown in the text. When the range of the confidence interval contains zero, it is unclear whether there was an increase or decrease; that is, the change is not statistically significant.

VII.b. Non-sampling Errors

As described in the section, ``Methodology Used for Data through 1998,'' a potential source of bias prior to 1999 was the upward adjustment of 3.3 percent made to account for houses sold in permit-issuing areas without permit authorization.

Another source is the adjustment for houses sold prior to permit authorization and for late reports. The preliminary estimates of privately owned houses sold are adjusted upward about 40 percent; the final estimates about 5 percent.

VIII. SEASONAL ADJUSTMENT

The mechanics of seasonal adjustment involve breaking down a time series into 'trend-cycle' and 'seasonal and irregular' components.

The trend-cycle is the long-term tendency of a series to grow or decline.

Seasonal effects are effects that are reasonably stable in terms of timing, direction and magnitude. Possible causes include natural factors (the weather), administrative measures and social/cultural/religious traditions.

The irregular component is anything not included in the trend-cycle or the seasonal effects (including trading-day or holiday effects). Its values are unpredictable with respect to timing, impact, and duration. It can arise from sampling error, non-sampling error, unseasonable weather, natural disasters, strikes, etc.

Monthly time series that are totals of daily activities can be influenced by each calendar month's weekday composition. This influence is revealed when monthly values consistently depend on which days of the week occur five times in the month. For example, building permit offices are usually closed on Saturday and Sunday. Thus, the number of building permits issued in a given month is likely to be higher if the month contains a surplus of weekdays and lower if the month contains a surplus of weekend days. Recurring effects associated with individual days of the week are called trading-day effects.

Trading-day effects can make it difficult to compare time series values or to compare movements in one series with movements in another. For this reason, when estimates of trading-day effects are statistically significant, we adjust them out of the series. The removal of such estimates is referred to as trading-day adjustment.

The new homes sold seasonally adjusted series is shown as seasonally adjusted annual rates (SAAR). The seasonally adjusted annual rate is the seasonally adjusted monthly value multiplied by 12. The benefit of the annual rate is that not only can we compare one monthly estimate with another, we can also compare monthly data to an annual total. The seasonally adjusted annual rate is neither a forecast nor a projection; rather it is a description of the rate of new home sales in the particular month for which they are calculated.

The seasonal adjustment factors shown in this publication were developed using X-12-ARIMA. The X-12-ARIMA is a seasonal adjustment program developed at the U.S. Census Bureau. The program is based on the Bureau's earlier X-11 program and the X-11-ARIMA/88 program developed at Statistics Canada. For more information on X-12-ARIMA please see the Bureau's X-12 website.

The procedures used to develop seasonal adjustments for monthly New Residential Sales are described below.

New Houses Sold

The seasonally adjusted annual rates are developed each month for single-family houses sold by region. Each month the four regional series are run through the X-12-ARIMA program. The seasonally adjusted U.S. total is the sum of the four seasonally adjusted components.

New One-Family Houses For Sale and Months' Supply at Current Sales Rate

The seasonally adjusted number of New One-Family Houses For Sale and Months' Supply at Current Sales Rate are developed at the national level. Each month the U.S. value for each series is run through the X-12-ARIMA program.

The X-12-Arima program that we use to derive our seasonal adjustment calculates numerous diagnostic statistics. The table below shows some of these statistics. For a description of the diagnostics published in this table, please click here.

For further information on time series and seasonal adjustment, please refer to the Seasonal Adjustment Frequently Asked Questions.

For further information, contact the Residential Construction Branch at 301-763-5160.

Source: U.S. Census Bureau
Last revised: February 05, 2008

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