I guess we've found the explanation for the slight upwards-blip in home sales over the past few months:

The median price of a new home plunged in September by the largest amount in more than 35 years, even as the pace of sales rebounded for a second month.

The Commerce Department reported that the median price for a new home sold in September was $217,100, a drop of 9.7 percent from September 2005. It was the lowest median price for a new home since September 2004 and the sharpest year-over-year decline since December 1970. The weakness in new home prices was even sharper than a 2.5 percent fall in the price of existing homes last month, which had been the biggest drop on record.

So in other words, bubbles are subject to market economics.

It will be interesting to see if and how the polyannas can spin this one.

Update, 2006-10-26, 7:30pm: A few hours after posting the above release, I decided to take a tour of the major news outlets online, to see what they said about the horrific news.

Well, I got my answer to my previous closing question about spin: apparently, the solution to such bad data is to simply ignore/hide it.

Most sites did technically mention the news -- buried somewhere in the small print, along with other trifles. I was so flabbergasted, I had to take screen shots -- because I think soon we as a society will look back on this day and this news coverage, and ask "why didn't we acknowledge reality by this point? Why did we ignore the warnings?" So here is the proof, for the historical record:

Top news at Marketwatch was Microsoft, whose profit and revenue were slightly up -- coming in at .5% over analyst concensus (yes, you read that right: point-five percent. Try to contain yourself, now).

Click on the thumbnail, and you can see that near the middle of the page, in small print, under a soft-landing-esque medium-sized headline about the housing market, is today's big news.

Below this, presumably to "balance things out", is a complete denial of the house price statistics from the National Association of Home Builders. This is the first time I've seen a major news outlet cover a criticism of such a major statistic, and of course, their source is a pathetically obvious conflict of interest (this reminds me of Fox and the AJC breathlessly covering Barrons' recent prediction of a GOP win).

Moving right along, let's take a gander at Yahoo! Finance -- one of my most frequented news outlets.

Unfortunately, Yahoo! disappoints in line with Marketwatch -- the home price plunge gets a small-print headline, once again pre-empted by Microsoft's "amazing" yet not-so-earth-shattering profits.

Where else might people typically go for financial news? Hmm, well, a web search turns up Forbes...

And here we go again: the housing plunge is below Microsoft profits, and amazingly, both of these stories take a back seat to a fluff feature on divorces! Way to be on the ball, Forbes! At some point in the near future, this screenshot is going to be very embarassing -- you might want to save it to show your grandchildren.

Next I thought I'd check Reuters. Surely Reuters is impartial and balanced, right?

Well, maybe they just don't know how to show it.

In their top stories, we have nothing even remotely about housing "above the fold" -- I had to scroll down about half a page to find anything. And then, hilariously, we have an article theorizing that housing is about to improve, so home builders look like a good buy!

Cringeworthy, to say the least.

I also checked Bloomberg, which didn't mention anything about housing at all. I didn't bother with a screenshot, because there was nothing notable on the page and nothing to take my virtual red pen to. No news on October 26, 2006, at Bloomberg.com.

My final stop on this ill-advised tour was CNN. Prepared to be disappointed, I pulled up the page, and was shocked by what I saw.

It was like visiting another planet. The image needed no marking up, because CNN makes it obvious that big, bad things are happening in the housing market. The top story is today's historical price plunge, as one would expect to see (if one hadn't toured all the other financial sites first, as I did).

The next article down features the top foreclosure markets, and (forgiving an article on the Great Stock Market Rally of '06), we have an article considering the housing bubble collapse a foregone conclusion.

CNN Money, you have earned an anointed spot in my MSM news rotation!

Because (in my opinion, at least) when something as important as home prices plunge at a rate not seen in 35 years, I consider it oh, I don't know, kind of a big deal. Apparently this sentiment is not shared by virtually any major news organization (except CNN).

Somehow I think the American people would disagree with these priorities.

Update, 2006-10-27: Now that the GDP number has come in at an abysmal 1.6% (below the 2.1% concensus, but not a surprise to some people), the above housing news has become unavoidable.

Update, 2006-10-27, 10:21pm: James Hamilton at Econbrowser has a post where he deconstructs the -10% housing sale price number, arguing that it is greatly exaggerated based on how it is constructed from the US regions. I have a couple posts of counter-argument to this claim in the discussion thread; in fact, I now am even more sure that the overall statistic is meaningful in both an absolute (present-day economic) and relative sense (historical compared to the series itself). In sum, Hamilton's sudden interest in questioning a major statistic just because the current reading is both extreme and undesireable is yet another example of Fallacy of Statistical Deus Ex Machina. But professional economists cannot really be expected to question key data series in any way that might suggest they're not doing such a great job.