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Maybe the National Association of REALTORS should have spent less time driving a bus around the country, and more time counting home sales?

Every organization makes mistakes, but some are worse than others, not the least because of timing. We’re too deep into a five year housing recession for these kinds of barrel wisps. And when data is having so little effect on consumer behavior, all that’s left is emotion. Trust. Confidence.

It’s all psychology in the housing market today.

Even the good data is already struggling to overcome buyer reticence to act. Negativa data – wage stagnation, high college tuition debt – are slowing household formations to the lowest pace in two generations. Today’s consumer is worried its leaders engage in fuzzy math on every topic: environmental science, medicine, social security, public debt.

Now it seems we can’t even properly report how many houses sold last year. Or the year before, nor the one before that.

The news that the National Association of REALTORS may have – most likely has – overestimated housing sales since 2007 is deeply troubling. The Voice of real estate has been telling one story, while the Abacus of real estate has been mis-carrying the one.

A couple of months ago, CoreLogic, who analyzes real estate market data, blew the whistle on this. According to MSN Real Estate, CoreLogic thinks “NAR’s home-sales numbers could be as much as 20% too high.” Even when NAR looked at its own data again, plus data from home builders, the Federal Reserve and the GSE mortgagors, it concluded that, “[our] numbers were too high and some sales were counted twice.”

Is it just another in a long tradition of playing with public trust? Enron. Madoff. Fannie Mae. Corzine. Now NAR?

Lots of factors could have contributed to this situation. CoreLogic analyzes property records, verified by lawyers and town record-keepers; NAR analyzes MLS data, entered and verified by its members. NAR also used a methodology that did not change when the market crashed; or accounted for new data in the Census. Sure, it wasn’t “on purpose” but should it be the purpose of the trade group to be accurate on perhaps the single most important metric of its industry?

If you were off by 20% on a high school math test, you’d get a C, not an A.

Beyond the math, there’s possibly a focus issue. Somehow, the bean counters at NAR can add $40 to every member’s annual dues – and spend $7 million per quarter – to lobby Washington. NAR has always lobbied Congress; but could the more aggressive approach lately have caused the organization to take its eye off the ball?

We’ve noted many times that Trulia, Zillow and other industry players are quoted more often than the National Association of REALTORS on a typical news day. What if journalists conclude that NAR’s data isn’t exactly better than anyone else’s data – or worse – suspect the under-reporting may have played a purpose? Many REALTORS themselves complain that Zillow’s zestimates are inaccurate, but a 20% credibility gap in NAR’s numbers puts that argument to an end.

What does this mean for the local REALTOR, or the local homeowner or buyer? Confidence problems. When a noted authority’s numbers fall into question, an air of skepticismsettles over everyone associated with them. For the local real estate agent, it will become harder to demonstrate the validity of their own local market data, simply because the consumers’ don’t feel like anyone is being truthful any more. Consumer emotions will get in the way; right or wrong. Even those who recently completed transactions might be reviewing their decisions in their heads.

Agents can argue that their data is local; but consumers’ perception in national. And irrational. And this news doesn’t make it any easier for the local agent to sit across a table from a buyer or seller.

Five years into a prolonged recession, we’ve seen the results of consumer un-confidence in the housing market. Buyers wait. Younger buyers head to their parents’ home after college. Sellers are staying nearly 50% longer in their existing homes than just 5 years ago.

Confidence matters. It’s psychology, not finance, that will turn the market around.

What creates consumer confidence? Honesty. Integrity. Commitment to excellence. Truthfulness. You don’t need to be perfect. Mistakes are understandable. But when you’re sitting across the table with clients, you can’t be making suggestions from a data set that’s missing 20% of what actually happened. It’s almost as bad as sitting across the table from Congress testifying you can’t remember where you put that 1 billion dollars in customer funds…

In neither case, even if we find the right data, it’s the consumer confidence that might not come back soon. Or ever.