As if we needed more reason question the National Association of Realtor’s financial advice, who profited greatly from the credit bubble and resulting real estate bubble, now we learn they may have been fudging the numbers using the wrong economic model once the housing crash began in 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%.
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.
Call me a cynic, but when an organization’s main sales pitch was “real estate never goes down in value” and now, roughly 1 in every 4 homes in the U.S. with a mortgage are underwater, the accuracy of any financial metrics they churn out should not only be questioned, but also verified.
Without going too much into the consumer protection side of this equation, consumers really have to keep in mind where money is exchanging hands. When a middleman (e.g. Realtor in this example) is making money off your home purchase, it’s in their best interests to show as much optimism, confidence, positive thinking, or whatever persuasion based sales tactic they may elect to employ it takes to make you feel warm and fuzzy to get you to close the transaction.
Examples of such persuasion techniques (e.g. sales pitches):
All of these are sales pitches used on me by Realtors from 2004 to 2010. One Realtor even told me I was crazy for not buying more real estate investment properties in 2005, and boom, we all know how that went.
So why in the world would anyone, especially after getting is so wrong on such a large scale, rely upon an organization for accurate assessment of anything. Especially when the same organization can create economic models — as Warren Buffet said: beware geeks bearing models — that might skew the analysis in their favor.
I’m not suggesting the numbers are biased one way or another. I’m simply saying be aware of the advice your getting, and how the actions of said advice (e.g. money flow) benefits the adviser.
Wall Street Journal
Home Sales Data Doubted
Realtor Group May Have Overstated Number of Existing Houses Sold Since 2007