“Home Sales Data Doubted” by Timiraos, Nick

Data given by the National Association of Realtors (NAR) may be erroneous. There is a possibility of exaggerated estimates of home sales, resulting from erroneous over-counting since 2007. Recent data by CoreLogic, which is based in California faults earlier data released by NAR. As CoreLogic reports a 10.8% reduction in home sales in 2010 compared to 2009, NAR reports a 5.7% reduction in the same. The two groups also report varying figures for 2009 sales as 4.9 million for NAR and 3.7 million for CoreLogic (Timiraos 1).

Although accurate figures would not substantially affect the sales, they would give the status quo of lacking investment in the sector, and the weak demand. Thus the period that would be taken to realize a given number of sales will be longer since the real downturn in the housing sector will be known to people. The real-estate sector will thus be adversely affected, with people being reluctant to invest in it. This is even though homeowners are less likely to be affected. The downward revision of the sales is being considered, but without overlooking possible understatement of the sales by CoreLogic. Once a downward revision is done, the sorry state of the real-estate sector will be revealed to investors. The revision is expected to be done this summer according to the NAR.

The discrepancies may have been brought by problems in sales tracking mechanisms. This fact has led to the emergence of other firms using different methods to track sales. CoreLogic uses local courthouses to achieve this objective, and allegedly tracks 85% of NAR-recorded sales. NAR uses multiple-listing services to track changes in sales occurring within a month. For its annual sales figures, census data is used in conjunction with a model that involves assumed parameters like population growth.

The NAR models are suspected to have given erroneous sales due to the changes in the coverage of the multiple listing services. This is amid the failure of these firms to report to NAR the extent of their coverage. To correct this problem, additional assumptions are required, such as the incorporation of the sale-by-owner issue, and an estimation of sales relating to this issue. NAR should make these adjustments for correct figures of sales (Timiraos 1).

Another problem is that the periodic revision of home-sales data by NAR will not be easy, because the 2010 census was not holistic. The census did not cover house sales data which is used by NAR for the aforementioned purpose. NAR must take a different approach to revise its data. Approached about its model by economists, NAR promised to look into the issue together with other stakeholders, spanning the public and private sectors.

For Mortgage Bankers Association, the cause of alarm in this issue was the inappropriateness of using the MBA mortgage-purchase application index in indicating the trends of house sales. The unreliability of this index started in 2007, and other data shows overstatement of the data for house sales by between 10% and 15%. Expressing concerns about this error, Mr. Brinkman, the Chief Economist at MBA said the market will be misguided (Timiraos 1).

The revisions are expected to affect business about the real estate but the broader economy may remain unscathed due to its reliance on the construction of new homes (Timiraos 1).

Works Cited

Timiraos, Nick. “Home Sales Data Doubted”. 2011. Web.