Home Sales Data Doubted Realtor Group May Have Overstated Number of Existing Houses Sold Since 2007

2011-02-22T16:55:00.000-08:00

By NICK TIMIRAOS

The housing crash may have been more severe than initial estimates have shown.

The National Association of Realtors, which produces a widely watched monthly estimate of sales of previously owned homes, is examining the possibility that it over-counted U.S. home sales dating back as far as 2007.

The data, used by economists, investors and the real-estate industry, could be revised downward this summer.

The group reported that there were 4.9 million sales of previously owned homes in 2010, down 5.7% from 5.2 million in 2009. But CoreLogic, a real-estate analytics firm based in Santa Ana, Calif., counted just 3.3 million homes sales last year, a drop of 10.8% from 3.7 million in 2009. CoreLogic says NAR could have overstated home sales by as much as 20%.

While revisions wouldn't affect reported home-price numbers, they could show that the housing market faces a bigger overhang in inventory, given the weaker demand.

In December, NAR said that it would take 8.1 months to sell some 3.6 million homes listed for sale at the current pace, but the number of months it would take could be even higher if sales are revised down. Any revisions wouldn't have an impact on homeowners, but it could have consequences for the real-estate industry. Downward revisions would show that "this horrific downturn in the housing market has been even more pronounced than what people thought, and people already thought it was pretty bad," said Thomas Lawler, an independent housing economist.

NAR said the data, which are used by economists, investors and the real-estate industry to gauge the health of the housing market, could be revised downward this summer. Lawrence Yun, chief economist at NAR, wasn't specific about whether and by how much the revisions could reduce reported sales, and he raised the possibility that the CoreLogic estimates have understated the number of home sales. "This is a very important issue, and we are looking at it carefully right now," Mr. Yun said.

Economists say any overstatement is the result of difficulty tracking data during market corrections. "This is an economic data issue, not a gaming-the-numbers issue," said Sam Khater, senior economist at CoreLogic. "Any time you get big shifts in the market, the numbers go haywire for a bit."

Over the past decade, a growing number of housing-research firms have sprouted up, offering new ways to track home sales.

CoreLogic, which was spun off from First American Financial Corp. last year, measures sales by tracking property records through local courthouses. The firm says its data covers approximately 85% of all home sales tracked by NAR.

NAR, which is due to report January home sales on Wednesday, uses a sample of sales data reported by local multiple-listing services to calculate monthly changes in sales.

To produce estimates of annual sales, it uses a model that is benchmarked to the figures reported in the decennial U.S. Census. The model requires making certain assumptions for population growth and other measures in between the census surveys.

Those models could have over-counted sales due to recent consolidation among multiple-listing services, which has resulted in those firms having wider coverage of housing markets. NAR's tally could be distorted if the firms "are sending us more home sales because they have a larger coverage area, but without informing us" that their reach has grown, said Mr. Yun.

Because not every home sale goes through a multiple-listing service, NAR must also make additional assumptions. For example, it must estimate what share of transactions are "for-sale by owner," and the housing downturn has sharply reduced that segment of the market. Consequently, the NAR could over-estimate sales if it hasn't properly adjusted for a smaller "for-sale by owner" share, said Mr. Yun.

NAR typically produces revisions of home-sales data at the end of every decade based on the latest Census survey data. But because the 2010 Census didn't ask U.S. residents about home sales, NAR must devise a new way to build its home-sales model.

Several economists approached NAR late last year with questions about its modeling. NAR economists promised to study the issue during a December conference call that included economists from the Mortgage Bankers Association, Fannie Mae, Freddie Mac, the Federal Reserve, the Federal Housing Finance Agency and CoreLogic.

Economists from the Mortgage Bankers Association said they became skeptical after the MBA's index of mortgage-purchase applications appeared to be a less reliable indicator of home sales. The index had been closely correlated to NAR existing home-sales data until 2007. Even assuming a high share of all-cash sales, purchase-loan application data suggests that home sales have been overstated by 10% to 15%, said Jay Brinkmann, the MBA's chief economist.

"If they are off by this much, this consistently, it would be sending the wrong signal to the market," said Mr. Brinkmann.
Downward revisions in existing home sales could have an impact on real-estate related businesses, but economists said it isn't clear that they would have a meaningful impact on the broader economy, which typically relies more heavily on new-home construction to drive growth.

The New Look...

2011-02-22T00:55:00.000-08:00

The Appraisal Alliance has a brand new look. Check it out. Also, visit us on Facebook. http://www.facebook.com/theappraisalalliance

How do we help an industry that goes out of its way to hurt itself?

2010-04-05T22:16:00.000-07:00

I have been fortunate enough to be asked to be a part of the appraisal alliance advisory board. experience has taught most boards or panels that are made up of mostly appraisers have a unique set of challenges.
The question that was presented by David Stevenson( I am assuming that most of you know Dave) was as follows:
What are the key elements that are missing to get appraisers to "Buy In," ( metaphorically.) to this concept?
He stated that the "client element," sees the value of this model immediately. On the other hand: even if appraisers have been directly referred by a client that they have worked with in the past, they are always looking for the negative angle in the program. Either it is too good to be true.( We all know the old adage!)
or the alliance is just another "somebody," that is trying to screw them over.
After an hour or so of appraiser opinions on the question, I find myself nowhere nearer to a resolution. So I am looking for some CONSTRUCTIVE assistance with this question. We know that the strength of any group is within its numbers. We also know that the alliance presents a really viable alternative to these crappy AMC's that care more about cheap pricing and speed forsaking quality for the Almighty buck.

David states that the potential client base is growing more rapidly than the appraiser family. Can it really be possible that the lenders are getting it before the appraisers? ( I guess there is always a first.) I for one am grateful to be a member of the alliance,and would love to be getting the majority of my work from them. We just have to realize that in order to grow in strength,we need to get the message across effectively.
This is after all a help us help ourselves environment. How do we get the message out more effectively?

Welcome

2010-04-05T14:33:00.000-07:00

Welcome Appraiser Alliance family members. I created this blog to hopefully create a more positive alternative to the existing blogs etc relating to the appraisal industry as a whole. I look forward to hearing what other appraisers thoughts are regarding the state of our industry, and how we might affect a change through the unique opportunities through this alliance. I look forward to all input.

The Appraisal Alliance blog

Home Sales Data Doubted Realtor Group May Have Overstated Number of Existing Houses Sold Since 2007

The New Look...

How do we help an industry that goes out of its way to hurt itself?

Welcome