NAR: Little Impact Seen from Data Revision of Existing Home Sales
As the National Association of Realtors® (NAR) first announced last week, its periodic rebenchmarking of existing home sales data uncovered some problems with the manner in which sales were counted beginning in 2007. NAR typically conducts a rebenchmarking every ten years when new Census Data is issued and has relied on that data as the main source of information to support its own sales data gathered from the various multiple listing services.
As the 2011 rebenchmarking began it was noted that a divergence in sales projections had developed over time between the fixed model for projecting sales rates and the actual marketplace including a decline in for-sale-by-owner transactions, changes in areas covered by multiple listing services, geographic population shifts, sales being recorded in more than one MLS and delays in sales being reported.
These factors resulted in a downward revision in 2010 data of 14.6 percent from the 4.91 million existing home sales that NAR had projected to 4.19 million sales. For the period 2007 to 2010 the downward revisions altered figures for both sales and sales inventory by 14.3 percent.
Lawrence Yun, NAR Chief Economist said, "It appears that about half of the revisions result solely from a decline in for-sale-by-owners (FSBOs), with more sellers turning to Realtors® to market their homes when the market softened. The FSBO market was overwhelmed during the housing downturn, and since most FSBOs are not reported in MLSs, national estimates of existing-home sales began to diverge based on previous assumptions," Yun said.
NAR consumer survey data in 2000 showed FSBOs accounted for a 16 percent market share, which fell to a record low 9 percent in 2010.
At a press conference following the release Judd Smith, speaking for NAR said that, despite the revisions to sales and inventory their relationship was unchanged so the impact would be small. The national sales figures are important to policy makers and the revisions are expected to have a minor impact on future revisions to Gross Domestic Product, but the changes are of no importance to consumers. All real estate is local, he said, and there were no changes to local MLS data nor were there any changes to pricing information which is the most important factor for consumers.
In response to a reporter Smith said that the increasing market share enjoyed by Realtors since the housing collapse "in retrospect" should have alerted NAR to the need for rebenchmarking but the process did begin as soon as anomalies were noted.
NAR has now begun incorporating county level recorders data to augment the Census data and will now rebenchmark on an annual basis.
Existing home sales data for November will be covered in a separate article.