The NAR Just Made The Mother Of All Data Revisions

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Update:The National Association of Realtors has revised existing home sales 14% lower for the past four years.

The drop represents the loss of more than two million sales from an inflated rate, bringing cumulative sales to 17.7 million for the four-year period. 

Together, this paints a far more dire picture of the nation’s housing market than was originally thought, and distorts the pace of the economic recovery in the U.S.

Below, annually adjusted data, from 2007 through 2010:

  • 2007 lowered 11% to 5.04 million
  • 2008 lowered 16% to 4.11 million
  • 2009 lowered 16% to 4.34 million
  • 2010 lowered 15% to 4.19 million

November home sales came in at an annualized rate of 4.42 million units, against expectations for 5.05 million. However, against revised lower sales for October, to 4.25 million, existing sales gained 4.0% sequentially, above forecasts.

The full release:

Washington, DC, December 21, 2011

Existing-home sales rose again in November and remain above a year ago, according to the National Association of Realtors®. Also released today were periodic benchmark revisions with downward adjustments to sales and inventory data since 2007, led by a decline in for-sale-by-owners.

Although rebenchmarking resulted in lower adjustments to several years of home sales data, the month-to-month characterization of market conditions did not change. There are no changes to home prices or month’s supply.

The latest monthly data shows total existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 4.0 per cent to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October, and are 12.2 per cent above the 3.94 million-unit pace in November 2010.

Lawrence Yun, NAR chief economist, said more people are taking advantage of the buyer’s market. “Sales reached the highest mark in 10 months and are 34 per cent above the cyclical low point in mid-2010 – a genuine sustained sales recovery appears to be developing,” he said. “We’ve seen healthy gains in contract activity, so it looks like more people are realising the great opportunity that exists in today’s market for buyers with long-term plans.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.99 per cent in November from 4.07 per cent in October; the rate was 4.30 per cent in November 2010; records date back to 1971.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said housing affordability conditions have set a new record high. “With record low mortgage interest rates and bargain home prices, NAR’s housing affordability index shows that a median-income family can easily afford a median-priced home,” he said.

“With consumer price inflation rising by more than 3 per cent this year, consumers are looking to lock-in steady payments by taking out long-term fixed-rate mortgages. However, the problem remains that some financially qualified families who are willing to stay well within their means are being denied the opportunity to buy in today’s market by the overly restrictive mortgage underwriting situation,” Veissi said.

An elevated level of contract failures continues to hold back a broader sales recovery. Contract failures2 were reported by 33 per cent of NAR members in November, unchanged from October but notably above a year ago when it was 9 per cent.

Contract failures are cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including lower conforming mortgage loan limits, home inspections and employment losses.

Also released today are benchmark revisions3 to historic existing-home sales. The 2010 benchmark shows there were 4,190,000 existing-home sales last year, a 14.6 per cent revision from the previously projected 4,908,000 sales. For the total period of 2007 through 2010, sales and inventory were downwardly revised by 14.3 per cent. The revisions are expected to have a minor impact on future revisions to Gross Domestic Product.

“From a consumer’s perspective, only the local market information matters and there are no changes to local multiple listing service (MLS) data or local supply-and-demand balance, or to local home prices,” Yun explained.

A divergence developed over time between sales reported by MLSs and sales determined by a U.S. Census benchmark; the variance began in 2007. Reasons include growth in MLS coverage areas from which sales data is collected, and geographic population shifts. “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 per cent market share, which fell to a record low 9 per cent in 2010.

“In essence, Realtors® began to capture a greater market share. In addition to a decline in FSBO transactions, more builders began marketing new properties through real estate brokers that weren’t completely filtered from the existing-home data,” Yun said. “Some property listings on more than one MLS, and issues related to house flipping, also contributed to the downward revisions.” The new independent benchmark was discussed with government agencies and outside housing market experts, and will allow for annual revisions in the future.

Total housing inventory at the end of November fell 5.8 per cent to 2.58 million existing homes available for sale, which represents a 7.0-month supply4 at the current sales pace, down from a 7.7-month supply in October. “Since setting a record of 4.04 million in July 2007, inventories have trended down and supplies are moving close to price stabilisation levels,” Yun said.

The national median existing-home price5 for all housing types was $164,200 in November, down 3.5 per cent from a year ago. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 29 per cent of sales in November (19 per cent were foreclosures and 10 per cent were short sales), compared with 28 per cent in October and 33 per cent in November 2010.

All-cash sales accounted for 28 per cent of purchases in November; they were 29 per cent in October and 31 per cent in November 2010. Investors make up the bulk of cash transactions.

Investors purchased 19 per cent of homes in November, little changed from 18 per cent in October and 19 per cent in November 2010. First-time buyers accounted for 35 per cent of transactions in November, up from 34 per cent in October and 32 per cent in November 2010.

Single-family home sales rose 4.5 per cent to a seasonally adjusted annual rate of 3.95 million in November from 3.78 million in October, and are 12.9 per cent above the 3.50 million-unit level in November 2010. The median existing single-family home price was $164,100 in November, down 4.0 per cent from a year ago.

Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 470,000 in November and are 6.8 per cent higher than the 440,000-unit pace one year ago. The median existing condo price6 was $164,600 in November, which is 0.2 per cent below November 2010.

Regionally, existing-home sales in the Northeast jumped 9.8 per cent to an annual pace of 560,000 in November and are 7.7 per cent above a year ago. The median price in the Northeast was $240,200, which is 0.1 per cent below November 2010.

Existing-home sales in the Midwest rose 4.3 per cent in November to a level of 960,000 and are 15.7 per cent higher than November 2010. The median price in the Midwest was $133,400, down 4.0 per cent from a year ago.

In the South, existing-home sales increased 2.4 per cent to an annual pace of 1.74 million in November and are 12.3 per cent above a year ago. The median price in the South was $143,300, which is 2.1 per cent below November 2010.

Existing-home sales in the West rose 3.6 per cent to an annual level of 1.16 million in November and are 11.5 per cent higher than November 2010. The median price in the West was $195,300, down 8.4 per cent below a year ago.

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