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Source link: http://archive.mises.org/15772/home-prices-decline-past-sales-data-overstated/

Home Prices Decline, Past Sales Data Overstated

February 22, 2011 by

The Standard & Poor’s/Case-Shiller Home Price index fell one percent in December. Prices fell in every market except Washington D.C. where the local economy is just humming along wonderfully. Prices in eleven of the twenty markets included in the index sank to post-bust lows: Atlanta, Charlotte, N.C., Chicago, Detroit, Las Vegas, Miami, New York, Phoenix, Portland, Ore., Seattle and Tampa, Fla.

“There’s just way too many homes out there relative to demand and we’re not going to see that change anytime soon,” said Joshua Shapiro, chief U.S. economist for MFR Inc.

Robert Shiller thinks price declines have another 15% to 25% to go, due to all the empty houses with no buyers, proposals to reduce the mortgage interest tax deduction being floated, the uncertain futures of Fannie and Freddie and Middle East unrest.

Case-Shiller also released its quarterly index covering all homes in the country. It showed prices fell 3.9 percent in the fourth quarter and 4.1 percent for all of 2010.

All of that may be the good news. The bad news is the Wall Street Journal reports that the National Association of Realtors may have been overstating existing home sale figures as far back 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%.

If the Realtors have overstated sales, the existing overhang of unsold homes is even greater than what’s been thought.

In determining annual sales numbers the Realtors have been using 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,” reports the WSJ.

The model may have overstated the number of 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 Lawrence Yun, who is the chief economist at NAR and the one keeping an eye on the model.

It seems economists working in residential real estate began questioning the NAR’s numbers after their organizations’ data diverged from the Realtors’ numbers in 2007. Jay Brinkman, from the Mortgage Bankers Association, and also a chief economist, thinks the the NAR’s sales numbers have been overstated by 10% to 15%.

Nick Timiraos concludes his WSJ piece, “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…”

I’m no chief economist, but I’ll take a stab and say downward revisions won’t be positive.

{ 6 comments }

Bruce Koerber February 22, 2011 at 3:32 pm

The truth is always positive!

Bogart February 22, 2011 at 3:59 pm

There are three kinds of lies: lies, damned lies, and statistics.

But the NAR and the Government wouldn’t lie to you. They love you.

JFF February 22, 2011 at 11:08 pm

Housing prices are still too high.

billwald February 23, 2011 at 12:43 pm

Prices will be to high until the median buyer can afford the median house.

The Wife and I seem to buy high and sell low when it comes to real estate. It doesn’t matter because we buy less than we can afford and because that’s where we want to live for the next 10 years. On a cost of living living basis the price doesn’t matter.

Boligsalg April 15, 2011 at 2:09 am

Oh, I was thinking to sell my house and shift to another, but now I feel that it will cause me a big loss due to the declining of pricesl which is perfect for the buyers but a nightmare for the seller.
http://www.iproperty.dk/properties/index.php?mod=properties&func=displayListing&mob_type=sale&auctype=1

Houses Colorado springs April 20, 2011 at 6:23 am

The United States housing bubble is an economic bubble affecting many parts of the United States housing market, including areas of Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maryland, Massachusetts, Michigan, Nevada, New Hampshire, New Jersey, New York, Ohio, Oregon, Rhode Island, Tennessee, Utah, Virginia and Washington. Housing prices peaked in early 2006, started to decline in 2006 and 2007,

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