Steadfast FinancesOverstated Home Sales Data: Housing Crash Worse than Expected?

Overstated Home Sales Data: Housing Crash Worse than Expected?

Filed in Consumer Education , Real Estate 4 comments

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):

  • Real estate values never go down.
  • The housing crash really isn’t that bad.
  • The market comes back, it always does.
  • Mortgage rates are at historical lows, so better jump in now and don’t worry so much about being underwater for a few years.

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.

Nick Timaraos
Wall Street Journal
Home Sales Data Doubted
Realtor Group May Have Overstated Number of Existing Houses Sold Since 2007

If you enjoyed this post, make sure you subscribe to my RSS feed!
Posted by CJ   @   22 February 2011 4 comments
Tags : , , , , , ,


Nov 18, 2011
4:10 pm
#1 Donna K :

I agree with you an I’m a real estate broker in Sedona Arizona. The public needs to be very careful in ALL industries today. Desperate times create an unsavory atmosphere and put people in harm’s way.

Nov 18, 2011
4:16 pm
#2 Donna K :

Core Logic is a respected source. Those of us in Arizona, Florida, Nevada, who are honest know just how difficult the market is. Anyone hearing those ‘persuasive..sales pitches’ you mention should RUN the opposite direction. While there are certainly good deals to be made today, no one…no organization…no politician can make any definitive statement about the future. If our congress and our banks continue to behave in their current manner, these hard times will create that ‘new normal’ we hear about. And it won’t be pretty for most people.

Nov 19, 2011
1:35 pm
#3 Lucas :

In any community, to the extent that a median income cannot afford a median turn-key house, houses are overpriced by that extent, regardless of so-called comps.

One more addition to your bullets: Real estate agents told me during the height of the bubble, “You better hurry up and buy before prices go even higher. You know, God ain’t making any more land.”

Nov 19, 2011
1:43 pm
#4 Matt SF :

I’ve heard that one as well. Aside from the fact it’s not geologically accurate (volcanoes make new land everyday), they did make way too many condos for people who couldn’t afford them. I just bought one cheaper than you can buy a fairly nice new car.

Leave a Comment




Previous Post
Next Post