The Wall Street Journal has released its latest 'real estate chart of the week' and the stories revolve around mortgages and mistakes. Obviously, we would expect talk about mortgages in a regular analysis. Do consumers expect mistakes in the real estate industry to be the news of the week? Well, possibly, yes!
The industry is not that far removed from the breaking news about the flawed foreclosures. In that fiasco, lending officials appeared to be "robo-signing" (signing without knowledge of details) foreclosure documents. This blog discussed - "Living with Flaws." Apparently, more mistakes surrounded the industry than buyers and sellers suspected at the time.
Mistake of the Week
Consumers have trusted the National Association of Realtors (NAR) to release reliable statistics. They put out a popular monthly estimate of previously owned homes. Now the group is "examining the possibility" that it over-counted U.S. home sales as far back as 2007. Of course, a statistics mix-up might not seem so strange to the readers of our blog. A while ago, we discussed – Confusing Real Estate Statistics.
The NAR reported that there were 4.9 million sales of previously owned homes in 2010 - down 5.7% from 5.2 million in 2009. According to CoreLogic, a real-estate analytics firm based in Santa Ana, Calif., there were just 3.3 million home sales last year - a drop of 10.8% from 3.7 million in 2009. CoreLogic's numbers suggest that the NAR could have overstated home sales by 20%.
The NAR are re-examining their data. Lawrence Yun, chief economist at NAR, did not reveal how much the revisions could reduce reported sales. As well, 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," says Lawrence Yun, chief economist at NAR.
Things are still up in the air until NAR takes another look at its data. Consumers can take comfort that mistakes are discovered and issues are examined to find resolution. Yet it would be even more comforting if the NAR could say confidently that a nationally-recognized group is not releasing wrong statistics.
Of course, these mistaken statistics are a different ball game from flawed foreclosures. Mistakes can happen – although vigilance is a must in all jobs especially when they affect an entire industry. Yet signing a foreclosure document – when you have not read a word of the document – falls into a different category. Wrong statistics, however, can still cause turmoil.
Revised statistics will not affect reported home-price numbers. Yet new numbers could show that the housing market faces a "bigger overhang in inventory" given the weaker demand. Although the revisions will not affect individual home owners, they would have consequences for the industry. Thomas Laler, an independent housing economist, explains how a NAR mistake could affect the real estate industry.
"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," ~ Thomas Laler – housing economist
For example, in December 2010 NAR said that it would take 8.1 months to sell 3.6 million homes listed for sale at the current pace. Yet if sales are revised down, it would mean that it took longer than 8.1 months to sell that number of homes.
Do You Trust Real Estate Statistics?
Image courteys of movessmartly.com