Big Freaking Surprise: NAR Overstated Home Sales

Okay, since this subject has been brought up in nearly every open thread over the past two weeks, I’m going to post about it here so we can just get it out of our system. Big freaking surprise: Realtors Lower 2007-2010 Home-Sales Estimates by 14%

U.S. home sales from 2007 through 2010 were about 14% lower than first reported, a real estate trade group said Wednesday, a sharp revision showing the housing bust was far worse than initially thought.

The National Association of Realtors revised downward its sales figures since 2007, using annual Census survey data to recalculate how many homes were sold.

The Realtors’ new figures also show 2008 was the worst year for home sales during the housing bust, with only 4.11 million sold, down 16% from the previous estimate of 4.91 million.

Home sales for the first 10 months of this year were also revised downward. October’s sales pace was lowered to a rate of about 4.25 million sales per year, from an original estimate, from an original level of 4.97 million.

Yun cited several reasons for the group’s sales revisions. The group’s reports were “not matching up with other housing-related data,” he said.

As you know, I regularly criticize the local multiple listing service for their lousy accounting methods that result in frequent blatant mis-statements of basic facts. Now multiply these types of issues times a few hundred MLSes across the whole country. Then realize that many MLSes geographically overlap each other, so a single sale gets reported in two or three different MLSes.

The NAR combines all of this crappy, sometimes redundant MLS data and then builds an estimate on top of it.

So you can perhaps understand why all of these stories about the NAR overstating sales have not come as any sort of surprise to me.

Of course, even the revelations that have come out of the NAR so far may not be the full story of just how crappy their data is. Calculated Risk reports: Lawler: The NAR "benchmark revision story" is not over!

In closing, enjoy this vintage 2007 NAR propaganda piece.

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

38 comments:

  1. 1
    Pegasus says:

    The NAR has consistently shown they can not be trusted. They lied in their press releases for years and they still do. Why would their sales data be any better? They had to know their figures were crap and now it is disclosed that they were off by 14-15 percent. I doubt it was accidental. That deviation is huge and any attempt to validate their numbers should have shown right away that they were erroneous. The false data actually help perpetrate the fraud that it was a good time to buy. I guess they can plead like Corzine….they have no idea what they were doing.

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  2. 2

    Good summary Tim, but you forgot to mention that the information would be pretty useless even if it were accurate. National data on sales is practically pointless.

    Also, I think a lot of conclusions are being drawn which are wrong. The corrections don’t show that the downturn in the market was overstated. To know that you’d have to know both that the prior data not being corrected was correct (it probably wasn’t), and that the new corrected data is correct (it probably isn’t).

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  3. 3

    On the topic of useless NAR data, I ran into this:

    http://realtormag.realtor.org/daily-news/2011/12/22/10-cities-where-list-prices-soared-last-month

    Assuming NAR is as effective as some of you seem to think, this type of thing is probably why so many people think they should look at list prices when valuing their house. ;-)

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  4. 4
    Chris says:

    I think even NAR now would agree housing went through a bubble phase so I don’t understand why its members tolerate it trying to re-inflate the bubble with hot air. The agents make money per transaction, so getting housing expensive or even keeping it were it is now probably takes money out of its members’ pockets in the long run and damages credibility. Is it momentum from its campaign of “Suzanne Researched This” baloney? It seems to me it’s shooting itself in the foot. At least the TBTF banks lie and lobby to line their own pockets. Is there cronyism in the NAR? It doesn’t make any sense.

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  5. 5

    By Chris @ 4:

    I think even NAR now would agree housing went through a bubble phase so I don’t understand why its members tolerate it trying to re-inflate the bubble with hot air. The agents make money per transaction, so getting housing expensive or even keeping it were it is now probably takes money out of its member’s pockets in the long run and damages credibility.

    You might be right, especially on the credibility issue, but you’re also assuming anyone pays attention to these numbers. True they are a headline item, so that will create an impression, but I really doubt they impact people that much.

    Locally I don’t think most agents would even think about it because most of Western Washington is covered by a single MLS. So the idea of double-triple counting wouldn’t be the first thing they would think of.

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  6. 6
    Chris says:

    I agree some of the numbers probably aren’t looked at too closely by the average home buyer but it seems it’s part of a campaign aimed at keeping the money flowing into the low money down programs (FHA) and bending lending standards to keep prices high like the banks and Fed want. I would think NAR would now break from that pack realizing the more units they sell, more or less, the more money they make along with state governments though excise taxes. It seems the banks have the NAR drinking its cool-aid. Maybe that’s what happens in DC.

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  7. 7

    Which reminds me why I adore this Real Estate Agent..She belongs to the NAR and has a pricing strategy!!:

    http://www.youtube.com/watch?v=pYuH5bIgzoo

    Or this one: http://www.youtube.com/watch?v=USPiwzRwQqE&feature=related

    apparently she would be against our $200 or $500 listings but I would still hire her! She can drive and talk at the same time while looking good! Thats good enough for 500 Realty and RedFin! A Multi-tasker!!

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  8. 8
    Pegasus says:

    RE: raymond pepper @ 7 – I bet the boss would say no to you hiring her.

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  9. 9
    splainin says:

    Doesn’t this correction suggest that the worst is behind us? As in, “wow, the cliff was more severe than we thought, and we’ve fallen a lot farther.” This seems like a narrative NAR would want to push.

    Tim which of your regular charts rely on the tainted data? Just the NWMLS-based sales information, or also the feeds from Redfin, et al.?

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  10. 10

    Isn’t “Nar” What Evil Pirates Exclaim With Parrots and a Peg Leg?

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  11. 11
    The Tim says:

    By splainin @ 9:

    Tim which of your regular charts rely on the tainted data? Just the NWMLS-based sales information, or also the feeds from Redfin, et al.?

    None. I don’t chart any national sales data or anything sourced from the NAR, and NWMLS sales data has issues that are different from these recently revealed NAR problems, which I detailed in the 2010 post linked in today’s post.

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  12. 12
    John Bailo says:

    You realize the USA is running out of people.

    U.S. Population Grows at Slowest Rate Since 1940s

    The population of the United States is growing at its slowest rate in more than 70 years, the U.S. Census Bureau said on Wednesday.

    The country’s population increased by an estimated 2.8 million to 311.6 million from April 1, 2010 to July 1, 2011. The growth rate of 0.92 percent was the lowest since the mid-1940s.

    “The nation’s overall growth rate is now at its lowest point since before the Baby Boom,” Census Bureau Director Robert Groves said in a statement.

    Read more: http://www.foxnews.com/health/2011/12/22/us-population-grows-at-slowest-rate-since-140s/#ixzz1hJ9saJBK

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  13. 13

    By splainin @ 9:

    Doesn’t this correction suggest that the worst is behind us? As in, “wow, the cliff was more severe than we thought, and we’ve fallen a lot farther.”

    That assumes the earlier data was right, which it probably wasn’t.

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  14. 14
    Paco says:

    Lately I’ve been kicking around an idea on how I can programmatically scrape public records for house sales and compare them against MLS listings. If I can’t trust anybody to have good sales numbers, I’m tracking so I can keep abreast of trends in Capitol Hill where I want to buy my first home, then I’m going to have to get the data myself. I know MLS has strict rules regarding getting this information via APIs, but Redfin has done all the hard work, does Redfin have any kind of HTTP API I can grab info about properties? Or does anyone have any idea how to get this info without having to do it manually? I can also grab info via public records searches but that’s like drinking from the firehose when you only need a gulp.

    I love this site Tim, I think you do a fantastic job, but I want very specific information about sales in a narrow slice of the city. Any ideas?

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  15. 15
    Jonness says:

    By Kary L. Krismer @ 2:

    National data on sales is practically pointless.

    Not true at all. It’s a blanket figure that can be used to trick people into buying homes they can’t afford. For instance, if you tell a potential buyer that the housing market is in the toilet and nobody has been buying due to a collapse caused by nationwide lax lending standards, the buyer will walk away. But if, by mysterious consequence, right when sales begin to fall off a cliff, you start misreporting by 15% on the high side, you can still claim, “now is a great time to buy.”

    The problem is, of course, 5 years down the road, you have to come clean on your scam. Otherwise, you can’t claim in the here and now, because the number of sales last month increased by 5%, we have reached a bottom.

    You see, compared to the old data, house sales actually fell by 10 MOM. Why would a salesman report that if he knows the numbers to be bogus? These people are not stupid. They are expert salespeople to the point of psychopathic precision. Thus, they only report that kind of data if it leads to more sales? Otherwise, they simply change the data, whenever they find it convenient, to make it look better to potential buyers.

    So there is good news at hand. Home sales are on the upswing, prices are still at record lows compared to the peak, and mortgage rates are at historical lows. IOW, “now is a great time to buy a house!”

    …well, at least until the next time they need to “fix” the data that is. But don’t worry, because it will be a great time to buy then too. Just as it’s always been a great time to buy…unless you like losing several hundred thousand dollars and eating dog food in your retirement years.

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  16. 16
    Jonness says:

    Back in 2007, when the NAR was busy proclaiming it was a great time to buy, it turned out to be a terrible time to buy. But all is not lost. It turned out to be a great time to fudge the data!

    http://www.inman.com/files/u4478/EHSRevisions_Calculated_Risk.jpg

    LOL! Can you imagine how many homes they sold by putting that fake runup at the beginning of Jan, 2007. It looked like a perfect bottom. But not even the NAR could fake the data bad enough to make the numbers look good for long.

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  17. 17
    David Losh says:

    Who cares? Why would any one care? What difference does it make? It’s sales data.

    The only way it makes a difference is if you are using charts, and graphs as a sales tool.

    Then to find that your charts, and graphs are wrong, well, that must be a big deal to some one.

    This is ridiculous to say that every one has to have up to date data, immediately, for some sales meeting, some place. The only trend that might be relevant would be years in the making. We had a bubble over a four year period, that should show how useless sales data is.

    There again, for the ETrade of Real Estate it probably is a big sales meeting topic.

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  18. 18
    Jonness says:

    By David Losh @ 17:

    Who cares? Why would any one care? What difference does it make? It’s sales data.

    For those who don’t already know, the NAR is nothing more than a house buying propaganda machine for RE agents. And any good propagandist knows, if a sheep is afraid to do something, all it takes to get over the fear is seeing another sheep doing it with a smile on his face.

    Personally, I’m shocked by how many people haven’t been paying attention to all the sales slogans over these last years. “Home sales are up, we’ve reached the bottom.” “Pending sales hit record numbers, we’ve reached the bottom.” ad nausea

    As I’ve said from the beginning of this mess to current, the overall trend of house prices remains in the downward direction. We have been (and are continuing to) experiencing an unprecedented opportunity to hold off buying and instead save up a down payment. Young families and first-time home buyers beware!

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  19. 19
    Azucar says:

    The NAR is always saying “it’s a great time to buy”, but doesn’t every transaction require a buyer AND a seller? Maybe they should start running ads about how the bottom is going to fall out of the market (even more that it has) and “it’s a great time to sell”. That could help to drive some selling based on the fear that “I need to sell now or be priced out forever”, so people who are “sitting on the fence” about selling would be encouraged to do so now at lower prices before even lower prices get here. Kind of a reverse of the bubble.

    I get all kinds of ideas. They just pop into my head – it’s like I can’t stop them!!!

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  20. 20
    karl says:

    http://www.businessweek.com/magazine/the-housing-hangover-12222011-gfx.html

    just thought the graphic was funny

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  21. 21
    Jonness says:

    BTW, does anyone know the terms of the deal these political crooks reached on the Social Security tax cut extension? Supposedly, it will be phased in over time. What are the dates and amounts new home buyers will have to pay and for how long? It might make for a good bubble blog.

    On the bright side, at least they didn’t tax any rich millionaires to pay for it. The status quo remains intact. And the wealthy corporations who are refusing to hire won’t have to take a hit to their record-breaking stashes of cash. :)

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  22. 22
    MichaelB says:

    I don’t understand all of the negativity around NAR. The best way to get more out of the exciting hobby of rocketry is to connect with other flyers. NAR can get you connected to the cutting edge of the hobby so you can learn how to fly higher, faster, and better. As an NAR member you will get:

    •Access to launch sites through local NAR clubs
    •The bimonthly color magazine “Sport Rocketry”
    •Insurance coverage for your flights
    •Certification for high power rocket flying

    Join the NAR today!

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  23. 23
    Chris says:

    RE: MichaelB @ 22
    Ha ha, can the NAR arrange financing for my rocket? I don’t have enough for a down payment but I want to fire mine today.

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  24. 24

    By Jonness @ 15:

    By Kary L. Krismer @ 2:
    National data on sales is practically pointless.

    Not true at all. It’s a blanket figure that can be used to trick people into buying homes they can’t afford.

    LOL. You and I have a different definition of “useless.”

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  25. 25

    By Jonness @ 21:

    BTW, does anyone know the terms of the deal these political crooks reached on the Social Security tax cut extension?

    No I don’t know, but whatever it is I doubt the money is going in to the SS fund. I think they’re probably reducing funds going into SS and offsetting that with general spending cuts. If they were funding it with cuts to SS there would have been an uproar.

    And I love how the administrator of the fund (or whatever they are called) says the tax holiday has no significant effect on the fund. You’re basically reducing funds in by 1/6th at a point in time where it’s started taking in less money than it pays out, and somehow that has no significant effect?

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  26. 26

    By David Losh @ 17:

    Who cares? Why would any one care? What difference does it make? It’s sales data.

    And it’s sales data over too large of an area. I complain about C-S because it’s three counties. I complain about the NWMLS data because it’s one county. This is the entire frick’n country!

    Even if you were a large nationwide builder the information wouldn’t be useful, because it wouldn’t tell you where to build.

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  27. 27
    David Losh says:

    What I was thinking this morning is if I had built a Real Estate sales site based on useless sales data as being the ETrade of residential Real Estate this would be a big deal.

    Another small thing is that the Multiple Listing Services, and National Association of Realtors are closed membership driven organizations. They don’t have to provide sales data. They do provide sales data as a way to generate sales. This is also used in the Comparative Market Analysis.

    So the problem is in the interpretation of the data.

    This is one of the areas that agency, and Brokerage have fallen down. In my opinion there is way too much reliance on the computer for Real Estate purchase and sales.

    Agents sit at the computer and “look” for the right property to come up. Yeah, any body can do that. Not a lot of agents are out there making things happen or networking.

    An experienced agent knows that you never rely on the sales data to tell you what is going on. After you do a few Comparative Market Analysis you can see the data is screwed up. There are a lot of reasons for that, but I’m thinking this is how the market is so wacky today.

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  28. 28
    Jimmy says:

    Live in debt or move.

    Rate this comment: Thumb up 0

  29. 29
    Jimmy says:

    In Seattle your choice is live in debt or move.

    Rate this comment: Thumb up 0

  30. 30

    RE: John Bailo @ 12

    Tell That To Our Critical Shortage Management the Last Several Decades

    Of water, trees, fish, jobs, etc, etc…..

    Its gonna take decades to fix America’s overpopulation problem, ask an American demographer trained in science and stop being brainwashed by corporate/foreign lobbyists after your job to overpopulate America even worse.

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  31. 31

    RE: Jonness @ 21

    Yes

    SWE’s going into denial on this issue, if I think about it too much it ruins my Christmas plans…

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  32. 32

    RE: Jimmy @ 29

    Except Ya Can’t Move With an Underwater Housing Debt

    Ya can’t afford to sell and the rent it out option is even more ludicrous.

    Trump and the elite rich get pats on the back for handing the keys back to the bank and defaulting on bad real estate deals….they call ‘em savvy businessmen….but we’re suppose to be “Mother Teresas” and stay in our over-priced Seattle shacks paying the same sort of Wall Street Crooks that would default on a dime all the excess monthly payments?

    Am I missing something here?

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  33. 33
    David Losh says:

    In my opinion an algorithm that picks up county recording data would be the only way to track sales. Not all transactions are a part of the Multiple.

    The National Association of Realtors is a lobby group to Congress. My second opinion of the day would be that the Association has done much more damage to the consumer, and public, than it has benefited it’s membership. I have no idea how they would be a reliable data source. It’s not what they do, or are about.

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  34. 34

    RE: David Losh @ 27

    “What I was thinking this morning is if I had built a Real Estate sales site”

    Dave don’t do that!! Just make a crafty video and draw people to you. Thats another problem with the NAR advertising…Too many people standing around, or riding bicycles….All the videos are too boring and have no CATCH and DRAW anymore.

    Back when homes were going up it didn’t take much. Now that properties will continue to go down the crapper and people are buried up to their eye balls in their homes they gotta step up the advertising a bit..

    http://www.youtube.com/watch?v=N0gb9v4LI4o&feature=related

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  35. 35
    ChrisM says:

    RE: raymond pepper @ 34 – Ray, apparently the ad has been taken down, but here’s an article about a real estate ad you’re probably advocating:

    http://www.pedestrian.tv/entertainment/news/gold-coast-real-estate-ad-goes-viral-%5Bviolent love-sells%5D/39208.htm

    They had at least two of them – Jim the Realtor mentioned them a while ago, but I can’t find the links.

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  36. 36

    RE: ChrisM @ 35

    I watched that one the other day!! Absolutely LOVED IT!!

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  37. 37
    MichaelB says:

    RE: Chris @ 23

    “Now is a great time to launch!”

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  38. 38
    George Orr says:

    Mix very sophisticated, slick and heart-string pulling marketing messaging with an education system that teaches the individual to follow the herd or risk being isolated (death), and you have a situation that’s ripe for raping the individual.

    This is not specific to real estate. This goes on in the financial world, health care industry, and even in the presidential debates on TV. We are raised like cattle by central bankers so that we continue to ensure they stay on top of the heap of humanity. They are a virus riding the oblivious host victim.

    I especially like the “sit on the fence” propaganda piece. The side profile of the idiotic-looking dufus male sitting on the fence suggests that we’re all a bunch of morons waiting for our wallet to be stolen right out of our pocket — that this is our lot in life, as mindless hosts for the countless parasitic minions of central bankers.

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