NAR Reports the Size of Their Error

The big news, officially released at 10 AM on December 21st is the release by the National Association of Realtors® of the size of their miscalculation of existing home sales over the previous five years.

NAR’s report is used by many analysts and government entities for reporting economic activity, including the GDP, Gross Domestic Product. NAR announced earlier that there has been a gradual creep upward of their sales estimates since 2007 that introduced significant inaccuracies. The main reason given has to do with the way the MLS, Multiple Listing Services, report sales. Some homes end up listed in more than one MLS system, and each is autonomous. So, if listed in say the Denver MLS and one in an outlying area, the home would be reported as sold twice, once in each MLS.

The size of the error over time was officially reported to be 14.6% for 2010, down to 4,190,000 from the previously reported 4,908,000. For the entire period from 2007 through 2010, sales were over-reported by 14.3%. The other implication of this reporting error is that the percentage of sales by Realtors as related to all sales was also over-reported. Thus, the sales by owners, FSBO sales, without Realtor involvement would have been higher.

Other Items in the Report

1. Completed sales, which include single family, townhomes, condominiums and coops, increased in November by 4.0% to a seasonally adjusted rate of 4.42 million. This was 12.2% above the rate in November of 2010.

2. Consumer price inflation is expected to be 3% this year, and consumers are trying to take advantage of historically low interest rates to lock in home payments for 30 years.

3. Despite item 2 above, a great many families that would like to buy a home now are being locked out of the market by very restrictive mortgage underwriting practices.

4. Related, there is an elevated level of contract failures, when deals are written but don’t make it to closing. Reasons for these included declined mortgage applications, appraisals below the negotiated price, or home inspection problems.

5. Total housing inventory in November fell by 5.8 percent to 2.58 million existing homes available for sale. This represents a 7 month supply at the current sales pace.

6. The national median existing home sales price for all housing types was $164,200 in November. Distressed homes sold at an average 29% discount to the sales prices on non-distressed properties.

7. All cash sales accounted for 28% of purchases in November, down from 29% in October. Investors accounted for 19% of November home purchases.

8. First time home buyers accounted for 35% of home sales in November, up from 34% in October and 32% in November 2010.

With the number of items in the press release, more than mentioned here, some would wonder if the NAR wanted to minimize the impact of news of their error by providing a huge number of figures in the release.