The National Association of Realtors (NAR) is downwardly revising home sale numbers dating back to January 2007. As it turns out, they were double counting some houses. So the housing market was actually worse than was previously thought. I am a member of NAR and, frankly, have a love/hate relationship with them (don’t worry, I’m not going to write anything further about that).
So how was NAR double counting? Let me step back a bit to give you the overview of how the numbers are compiled. Most multiple listing services (MLS) are owned by the local branch of the Realtor association. Any property listed by a member of the Realtor association must be entered into the MLS so it is a good representation of the overall housing market. Each month, the local Realtor Association sends the data to NAR which compiles the national stats. However, the data that comes out is only as good as the data that goes in. As a Realtor, I can tell you that there is a lot of garbage in there. Further, in addition to resale homes, new construction houses are also counted in the MLS. Because only some new construction homes are listed in the MLS, this gives incomplete data. Personally, I believe the Austin Board of Realtors should primarily report on existing home sales, then mention as a footnote the new construction leaving the accurate new home data to come from the builder’s association. To give an example, according to the Austin/Central Texas Realty Information Service (our MLS), there were 19711 total sales in 2010. When you exclude new construction sales, the total was 17663 – a drop of more than 10%. Clearly, even if this was the only thing wrong with the data, there has been a big overstatement on the national scale. In fact, according to an article on the CNBC website, a real estate statistics company believes that NAR may have overstated sales by as much as 20%. It will be interesting to see exactly what the restatement is when released next week.
On a related note for those who care, the sales numbers released each month by the Austin Board of Realtors are not taken straight out of the MLS. In fact, the MLS records are sent to the Real Estate Center at Texas A&M. They run the data through some formulas to provide an estimate of the actual sales figures (they correctly presume that some Realtors fail to report sales in a timely manner). These figures are then sent back to ABOR and released to Realtors, the media, and the public (I investigated this a while back because the numbers reported each month never matched what I compiled by looking at the MLS). The Real Estate Center then updates the sales figures about six months later by looking at the actual MLS data (although the 2010 sales numbers in the MLS are different than the total from the Real Estate Center so who knows).
While the housing stats compiled by NAR are a good representation of the housing market, don’t take them as absolute. Remember that NAR is a trade organization and one of the main objectives is to promote the buying and selling of houses.