National Association of realtors caught lying about home sales


Will realtors ever stop lying to us? Apparently, they thought it best to show a market with robust sales even though the reality was low sales. Starting in 2007, just as sales volumes were plummeting because prices were high and qualifying buyers were scarce, the National Association of realtors revised their methodology in a way that overstated sales significantly over the last 4 years. In others words, if you thought sales rates were tolerably low, you were deceived by as much as 20% by the NAr.

This lie was completely self serving. The NAr wanted to dupe buyers into thinking the market was stable to induce transactions that never would have gone through if buyers had known the truth. Many of those buyers in 2007 and 2008 are now underwater, and with the double dip, the 2009 and 2010 buyers may join them.

What those buyers deserved was to be educated to the reality of the housing market. What they got instead was reassuring lies.

Home Sales Data Doubted

Realtor Group May Have Overstated Number of Existing Houses Sold Since 2007


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 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.

This is the core of the deception. The actual sales numbers are a jumble of numbers the NAr can spin however they like; however, the months of supply calculation is a widely known market gauge with an accepted interpretation: more than 6 months of inventory is bad and less than 6 months is good. In order to manipulate this statistic, the denominator (home sales) needs to be as large as possible. Anything which overstates home sales directly impacts the months of supply.


In early 2007, months of supply had been above 6 months for about a year. Is anyone surprised they found a way to change their sales numbers to bring the months of supply down? This summer, existing-home sales sunk to lowest level ever recorded. I wonder how bad it really was? And how large did the months of supply get? And how many months of supply do we currently have?

Manipulating sales numbers for the months of supply calculation is very important to those who believe it is always a good time to buy. Steve Thomas of the now defunct Altera Real Estate used escrows rather than closed sales because it had the same effect.


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.

So CoreLogic actually counts them and the NAr uses some statistical voodoo to estimate them? Hmmm… I wonder whose methodology will prevail?

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.

So the NAr’s methodology is rooted in a ten-year old piece of data that is no longer being collected? I think they have some significant revising to do.

Here’s what I don’t get. If every major retailer can operate a national database of their store inventory, why can’t the NAr. Why can’t the NAr simply query their database and tell us exactly how many homes sold, where they sold, and for how much? They try to make themselves valuable by being the purveyors of vital information, but they operate arcane systems and produce unreliable reports.

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.

Write to Nick Timiraos at [email protected]

Really, most rational people already knows the NAr is duplicitous. That’s why realtors in used house sales are held in the same regard as slimeballs in used car sales.

Barry Ritholtz at the Big Picture had this to say to the realtors before this latest scandal:

Attention RE Agents: NAR Spin is Counter-Productive !

By Barry Ritholtz – September 1st, 2010, 9:15AM

We have had a god-awful run of Housing data. New and Existing Home Sales, Defaults and Foreclosure data, even the Case Shiller report — all have been utterly horrific.

In light of this, I want to make the following announcement: Attention RE Agents! The National Association of Realtors are doing you a terrible disservice.

Consider the following comments from a RE Agent, published exactly three years ago (September 4, 2007) in the Realty Times:

“The National Association of Realtors and your state association will always have published reports that sound better than what you are personally experiencing in the market. Please understand that they support us. They know that whatever they say will end up in public press. We do not need any more negative press! When you read reports that we have reached the bottom or that the market has actually gone up, take it with a grain of salt. Their job is to permeate the world with good news about real estate.”

In other words, mislead the public with spin. Create false hope. Lie. This agent was defending the National Association of Realtor’s blatant dishonesty — a mistake on its face — just as the damage they did began to have an effect.

What the NAR was offering to buyers, sellers, their agents, indeed, anyone involved with Housing, was the blue pill.

The sort of nonsense the Realtor’s group peddles helps explain why sellers have incorrectly believed a recovery was imminent, even as housing went through a historic collapse. It is why home owners incorrectly still expect their homes to go appreciate by 10% a year.

These false beliefs have real world consequences. They create ridiculous expectations among sellers, who selectively grab onto any positive news they can. They choose the temporary blissful ignorance of illusion — that damned blue pill — versus embracing the painful truth of reality (i.e., the red pill).

This confirmation bias leads sellers into mis-pricing the value of their homes. They have been a season or even a year or more behind the pricing curve the entire way down.

Ask any listing agent how difficult it is to get sellers to become realistic in their asking prices. Real Estate agents would be moving a helluvalot more houses if they were not fighting misinformation that the NAR has put into the marketplace. Many, many agents have confirmed that, even in this crummy environment, a good house properly priced will sell.

Here’s a question for you reality (vs NAR realty) agents. Ever wonder why you seem to be having such a hard time convincing sellers to set reasonable asking prices? Ever ponder why they have such a distorted sense of the true value of their homes? Ever try to get them to set reasonable asking numbers that are competitive with current market prices?

The short answer: NAR spin.

To see how bad this false NAR narrative has become, check out this new show on HGTV: “Real Estate Intervention.” The show’s hosts travel town-to-town in an attempt to convince homeowners to sober up, put the magic mushrooms away, and price their houses realistically. They literally drag these poor bastards to nicer comparable homes to theirs — better locations, bigger square footage, nicer kitchens — all in an effort to TALK SELLERS INTO REALISTIC PRICE POINTS. It staggers the imagination: A television show actually had to be created to counter-act the excess stupidity coming from the Realtor’s trade group.

Gee, where do you think sellers got these crazy ideas? Might the NAR, by encouraging a fantasy, be actually hurting the housing market as a whole?

Even the normally staid NYT has recognized how absurd the NAR spin has become. This past weekend, Joe Nocera began an article with the sentence: “You have to wonder sometimes what they’re smoking over there at the National Association of Realtors.”

When the Gray Lady asks if your economists are high, isn’t that are warning sign that you must make a major change? How on earth is having a reputation of being stoners good for the RE business?

And, buyers have figured out that the NAR news releases are unmitigated fantasy. They have learned that any organization that has to go to such lengths to spin bad news must know that the news is much much worse. The result has been a Real Estate buyers strike.

Here it is, three years after that lame defense of NAR spin, and we can see the damage that spin has wrought. It is readily apparent that the NAR has become counter-productive to the agents they are supposed to be serving.

No, the NAR is not supporting you. They are making your jobs much, much harder. They are spinning the public, and doing you an enormous disservice.

Try RealityTM! Its what is working these days.

Perhaps the NAr will implode or new blood within the organization will see the organizations role differently. What they need is a commitment to accuracy rather than a commitment to spinning. What should they do if it really isn’t a good time to buy? Is a listing agent duty bound to lie for a client to convince a buyer the property is a good investment? Is a buyer’s agent who pushes their clients into a sale serving or harming them?

The National Association of realtors has a belief pathology. A core belief is eating away like a cancer — buyers can-should-must be manipulated into purchasing a house. This core belief guides many of their programs, advertising campaigns, and general attitude toward both buyers and sellers. Based on their advertising, I would say they think buyers are stupid sheeple.

The not very assuring truth

Buying can still be a good choice even in a declining market. Buyers who are motivated to save on renting are the stabilizing force in any real estate market, and it is the activity of these buyers that ultimately turns the tide. Those who bought in 2008-2010 can still have positive outcomes, particularly if they hold for several years. Those who purchased knowing this reality made a conscious choice to buy even with the financial circumstances.

Not every real estate purchase need be motivated by obtaining appreciation. Some people bought knowing they were overpaying in a declining market because it was the right time for them and their family. They examined the financial implications of their decisions and did it anyway. That made the decision right for them whatever those of us on the outside might think.

Clear decision making made with real data almost always produces a good outcome. Every buyer deserves the opportunity to decide for themselves based on good information. Unfortunately, it isn’t what buyers get from realtors.

(BTW, if you haven’t seen it, Keith at Housing Panic made a new post after two years. It said to buy real estate.)