There’s likely going to be a lot of puffed up anger and indignation about today’s dramatic downward revision of existing home sales by the National Association of Realtors. (“Rebenchmarking” is the term being used by the NAR.)
But those of us who have been watching the housing market closely have been expected that revision for many months.
CoreLogic challenged the NAR’s data way back in February. See CoreLogic: NAR’s 2010 existing home sales are overstated by 15% to 20% by Caluulated Risk, published on Feb. 15th.
While it’s disturbing that the NAR has been overstating sales on an ongoing basis because of “updrift“, I’m most troubled by the widening gap of recent years. The NAR’s chief economist Lawrence Yun has compromised his integrity with absurd statements and analyses over the last few years; the press played along by quoting him even when his predictions were obviously pie-in-the-sky ones. Maybe it’s time for a new economist at the NAR.
Still, it seems that the NAR has overestimated inventory while overestimating sales. That means that months of supply — one of the key determinants of price trends — are unchanged.
Some have already noted, however, that there’s a blow to confidence here. Individual buyers might have even more reason to be skeptical of their Realtor’s advice, and the news of such widescale overestimation of sales is going to send a cynical ripple through a populace already jaded about housing.
Here’s a portion of the NAR press release from moments ago:
[. . .]Also released today were periodic benchmark revisions with downward adjustments to sales and inventory data since 2007, led by a decline in for-sale-by-owners.
Although rebenchmarking resulted in lower adjustments to several years of home sales data, the month-to-month characterization of market conditions did not change. There are no changes to home prices or month’s supply.
The 2010 benchmark shows there were 4,190,000 existing-home sales last year, a 14.6 percent revision from the previously projected 4,908,000 sales. For the total period of 2007 through 2010, sales and inventory were downwardly revised by 14.3 percent. The revisions are expected to have a minor impact on future revisions to Gross Domestic Product. [. . .]
A divergence developed over time between sales reported by MLSs and sales determined by a U.S. Census benchmark; the variance began in 2007. Reasons include growth in MLS coverage areas from which sales data is collected, and geographic population shifts. “It appears that about half of the revisions result solely from a decline in for-sale-by-owners (FSBOs), with more sellers turning to Realtors® to market their homes when the market softened. The FSBO market was overwhelmed during the housing downturn, and since most FSBOs are not reported in MLSs, national estimates of existing-home sales began to diverge based on previous assumptions,” Yun said.
NAR consumer survey data in 2000 showed FSBOs accounted for a 16 percent market share, which fell to a record low 9 percent in 2010.
UPDATE: Calculated Risk has a great summary here. The post includes this graph:
The sales spikes in mid-2009 and early-2010 are due to the expiration of homebuyer tax credits. Still, there’s a lot of volatility in sales over the last four years; since this data is presented at a seasonally adjusted annual rate, we should expect eventually to see sales follow more predictable trends, once the market returns to some semblance of normal.