Housing Stats At Issue

Posted by Dave Fratello on Tuesday, February 22nd, 2011 at 10:45pm.

Here's hoping you're enjoying a little break time. Before we get local again tomorrow, let's just check in with some national housing stats.

What's that? No one knows anything anymore? Signals have gone haywire? 

It's fairly big news that the National Association of Realtors apparently has been overstating home sales nationally since roughly 2007 – perhaps by 10, 15 or 20%. (See today's WSJ article.)

This may not strike you as all that surprising, if you're skeptical of the RE lobby group generally. And it may ring especially true if you recall the shadiness around the group's past top economist, David Lereah – named by Time Magazine as one of "25 People to Blame for the Financial Crisis."

A new economist took over at NAR in 2007, but the suggestion – for now – is that blame for the home-sales reporting errors rests in the methodology long used by NAR to craft its national estimates.

It seems the group estimates national housing sales – wait, estimates? don't they sell houses? – based on samples from local MLS databases, adds in an estimate of FSBOs and off-market sales, and projects those out with some help from census data. Now it seems that those estimation methods were easily tricked with changes in the market – and even local MLS databases – after the bubble popped.

A critic at CoreLogic, a housing data provider, seemed sympathetic:

"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." (quote via WSJ)
Backward-looking revisions are expected from NAR this Summer. We're likely to learn then that things were worse than we knew over the past few years.

Good thing trends have been heading up again. Or...

Case-Shiller's 2010 uptrend has reversed
Real-time data are pouring in from Case-Shiller. (Click graphic to enlarge.)

The index seems to make news every week, always saying roughly the same thing: a national downtrend has taken hold again, but L.A. is somewhat different. (For example, 3 cities in California – San Francisco, San Diego and L.A. – were among only 4 monitored by the index that showed any price increases in 2010.)

So which is it? Are we better off? Worse off? What's the future?

Turns out Case and Shiller disagree about the future. As this new NY Times piece notes, Case calls the current state of the market a "rocky bottom with a down trend," but doesn't seem to think the sky will fall. Shiller, on the other hand, sees "'a substantial risk' of declines of '15 percent, 20 percent, 25 percent'" from here.

One factor Mr. Shiller points to is the "uncertain future" of the quasi-socialist enterprises Fannie Mae and Freddie Mac, recently targeted by President Obama for destruction.

Maybe if the GOP can rescue big-government housing support, and the NAR can get its facts straight, both Case and Shiller can turn that frown upside down. Could all 3 happen in one year?
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