Matthew Ferrara, Philosopher

NAR Loses Nearly 1 in 5 Home Sales; Confidence Next?

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.



  • This is such a miserable mistake on the part of NAR that it hurts my head just to think about it.

    On the one hand, we practitioners on the street have known – intuitively and empirically – that the NAR sunshine machine could not possibly be right. Yet, as you so astutely point out, the general public doesn’t understand “local” when they are constantly barraged with “national”.

    Your points about the credibility of NAR data vis vis its political agenda is also right on the, er, money. Why would any politician listen to NAR? Campaign contributions would be the only reason and, thus, the increased dues.

    Unfortunately, there is no place the individual practitioner can go. Whether it’s MLS access, lock box access, or even the ability to hang my license with a Broker, the cards are heavily stacked to force membership in NAR.

    With all the hoopla about anti-trust with “price fixing” and commissions, no one looks at the stranglehold NAR has on practitioners to join and pay up.

  • Ken:

    I hear you, loud and clear. It’s very frustrating because when I look at the hard-working agents in my workshops around the country, I sometimes shake my head because the trade group often makes it harder than it has to be. Add on top of that the national media, and it’s like agents and brokers are squeezed on both ends!
    The only suggestion I have, which comes by way of my friend Steve Harney, is to make sure you have the best, clearest and most accurate local data possible, and then practice communicating it every chance you get – blog, newsletter, phone calls, when you meet people, and of course, at presentations. If “THE” voice can’t be your backup out there, then YOUR voice will have to do the work…
    Thanks for your comments!!

    — Matthew

  • Danny Dietl

    I’ve read this from CNN half a dozen times and it makes zero sense : The MLS database only includes home sales listed by realtors, and excludes homes listed by owners, providing a very narrow view of the market. And because more people are using realtors to list their homes instead of selling them independently, realtor-listed sales numbers have become artificially inflated, said Yun.

    More people are using realtors which makes counting realtor sales a very narrow view? Okay, Yun…

  • Tomjera1

    This lie was perpetrated for political purposes. Now the NAR has doubled dues so they can double their bankroll to buy more lap dances “for political purposes”.

  • Matt this is the best opinion I’ve read on the subject.  You’ve written the truth.  So refreshing.  I do respect your honesty.  Thank you, sir.  

    The comments are spot on as well.  Thanks also to everyone who commented.  It tells me someone . . . anyone . . . knows the real truth and is not afraid to say it.

  • Thanks, Sheila. I appreciate your comments. Even if the mistake was an honest one, we have to recognize it had consequences, for practitioners and consumers. NAR never really acknowledged that. It’s a shame.
    Have a good day,