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WSJ Reports NAR has been padding the numbers. Does it Matter?

By
Real Estate Broker/Owner with Criado Realty 0548772

Housing Market Trends ChartThe Wall Street Journal reported yesterday that the housing sales reports by the National Association of Realtors dated 2007-2010 are actually 20% worse than what was reported.  NAR walks a fine line when reporting facts and building membership, just like our own accountability between buyers and sellers in that we owe fiduciary to the client and truth to others.  NAR, in its effort to deflate the media bias may have inadvertently endorsed the widely held public's opinion that the real estate market is bad, and that Realtors are not trustworthy. But that's simply not true. 

Is WSJ any different in their motives and objectives from NAR?  Not really.  They have to write to their audience, while being truthful.  When I saw this story break I had every intention of slamming NAR for fueling the belief that real estate isn't stable and that real estate agents are not honest.  But after some Q&A on Trulia and receiving some great "answers" I decided to write about the real issue, that has created this controvery caused by two competitors within the same industry -  Financial Investments.

The WSJ is probably tired of hearing Robert Kiyosaki and Donald Trump, along with a string of infomercial guys say that you should put your money where it has the potential to provide the highest ROI and learn all about the market to minimize risk. I'm sure with pervasive negative media about corporate scandals, failiures, etc. that the DOW and NASDAQ are losing funds to - real estate, the pressure to knock down real estate is huge.

Let's look at the NAR quandary of toggling between truth and growing its membership. They have to report numbers supported with data from MLS data bases and banks across the country, yet they have to put it in the best light to keep members happy. 

Let's talk about reporting the numbers for a minute. You can manipulate data however you want -that's the definition of statisitcs.  In a normal bell shaped curve you can adjust your standard deviation.  If your number is 52 it really is a range of 50-54 with a 2% standard deviation. The statistician can change that margin of error or data set to reflect their output, and because nobody reads the fine print, nobody knows. Did you know that "average" doesn't always mean the same thing when used?  It depends on which outcome drives your point best, mean, median, or mode. It's just that complicated.

Do I care about NAR reports?  Sure, but I know enough about stats to know it's just a trend tool. Other than that, no.  The media seeks drama to report for ratings which turn into advertising dollars - sell-outs.  They always talk about national averages in 30 second sound-bites - phooey.  Can you even introduce yourself in 30 seconds without missing important information?

I put even less weight in national reports when I consider housing values.  Take one city that has maybe a 20-25% foreclosure rate in a city, and even higher if you drill down to a zip code or MLS area.  Then compare that to San Antonio you'll get less than 10%, no matter how far you drill down (assuming you aren't looking at a developer who goes belly up, an outlier). The only news I respect is C-Span, which doesn't take advertising dollars, doesn't have a political agenda, and invites callers to call in live - way cool!

THE GOOD NEWS!  This whole media battle is about convincing buyers to buy something - stocks or real estate. Historically real estate has been more stable than any other financial product other than T-Bills (over-leveraged) and municipal bonds (which now are not so trustworthy given cities and states are so far in the red they are filing bankruptcy).  There are some exceptions but it's not the rule, it just seems that way since the media focuses on these dramatic situations.  Real estate is a scarce commodity, and people have invested in it for centuries making it the longest running investment market in the world. Anyone who owns land is wealthy. The euro, gold, the dollar - they can bust. But if you have land and its assets, you rule. 

 

So which is better? Stocks, bonds, or real estate? Diversify, that's what I say!

 

 

Posted by
Cathy Criado President & Founder
MBA, REALTOR, BROKER, NAR GREEN, EcoBroker
Published Author
Your Real Estate Consultant!
 
999 E Basse Rd. #180-425, ​San Antonio, TX  78209​
​Direct:  (210) 560-1891
 
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Comments (46)

Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

If, in fact, the NAR has been padding numbers, there's really no excuse for it.  It's dishonest and does no one any service.  

Occasionally data is revised when reviewed.  Done all the time with government forecasts and reports.  Hopefully, this is the case here as well.

Dec 15, 2011 12:38 AM
Judith Sinnard
SMARTePLANS; Houston, Texas - Houston, TX
The SMARTePLAN Lady

Uh ... Hell yes it matters! The industry and every agent in it (whether NAR member or not) took a huge hit. In this case you're viewed by the public through one of two lenses: #1 as either incompetent or # 2 manipulative/sneaky --- take your pick.  Incompetent because you can't track and report reliable data or manipulative/sneaky because you knew the data, yet willingly altered it to publisize an enhanced (and non-existent) reality.

I use the word "You" as the plural for ALL agents -- consumers still don't have a hang on the "Realtor" vs. non-Realtor thing --- you are all tarred with the same brush. And speaking of tar -- its your own organization that screwed up ... you know the one with the much publisized Code of Ethics??? The news agencies just shrug this off as their position is " Hey, ... we're only reporting the data we were given .. who knew NAR couldn't report data correctly??" And you guys think by explaining to a client "my local data is correct" it's going to make a difference ...I hope so ... but I doubt it. 

Dec 15, 2011 12:49 AM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

NAR is not helping us when they present an unrealistic picture of what is really happening !

Dec 15, 2011 01:08 AM
Kim Boekholder Utah Real Estate/ PECO
Results Real Estate 801.580.5624 - Draper, UT
Broker Results Real Estate/Leasing Specialist PECO

NAR needs to get it right, we don't pad our numbers when we post stats or meet with clients.  They need to make sure they know how to report numbers if they are going to report them.  They have a huge audience.  While real estate is local, anyone that has that large of a voice can do a lot of damage.   We need to build trust and misrepresenting the facts is not the way to do it.  

 

Great post! 

Dec 15, 2011 01:22 AM
Mike Cooper, Broker VA,WV
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

Like some of the folks said above, all real estate is local.  When I heard the report on the NAR's reporting of home sales I had two thoughts.  1.  It injures the credibility of Realtors; 2.  It deceives the public as well as agents which might cause both to take the wrong actions in the current market.  If you know A is a problem, then B might be the solution.  But if you're really told that D is the problem, then F might be the solution when in reality it is really is A and B you'll act on D and F.  It puts you in the wrong place to make decisions. 

Dec 15, 2011 01:22 AM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Cathy, one thing is true about statistics. You make them turn out any way you want them to turn out. Maybe they meant to say there was a 20% SD and mistakenly dropped the zero.

Dec 15, 2011 01:25 AM
Cathy Criado
Criado Realty - San Antonio, TX
Making Real Estate Profitable

Mike, I was beginning to think I was going to need to note pad to track this, lol. But seriously, you make a great pointso to add to this you might want to print a copy if the WSJ to add to your listing packet :-)

Dec 15, 2011 01:30 AM
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Morning Cathy,  I understand your premise but respectfully disagree with the conclusion.  That headline will come back to hurt us every time we answer the question " How is the market doing ?"  People see the NAR and we agents as being the same thing.  NAR has undermined our credibility with our local audience.  Shame on them !!!

Dec 15, 2011 01:31 AM
Cathy Criado
Criado Realty - San Antonio, TX
Making Real Estate Profitable

Michael, that's funny.

Kim, thanks. FYI, one of my many points is that ALL stats are skewed in some way or another. Its really sad that so many buy onto the idea that media is fact and stats are without bias. 20% is gross, but NAR hasnt acknowledged that amount. They only said tey will review the data and announce a correction. I may be as low as 2-5% which is reasonable given the volume and margin of error.

Judith, touve got that right. I'm not saying I can completely override the media but if we can shoclients raw data, not a graph, chart, or trend, but houses, prices, and a summary of sold then most of tne damage can be controlled, assuming you have an educated or intelligent client. Those who don't have a clue about stats  ut believe tbe media will have the worst i pact since tbey may not uderstand any of it. But in that case, they tend to trust their agents more than themselves.  At least that's been my experience.

Dec 15, 2011 01:41 AM
Cathy Criado
Criado Realty - San Antonio, TX
Making Real Estate Profitable

Bill, what I believe and what I think tbe consumer believes are two different things. I'm in a great market and battle the headlines everyday. Yeah, NARInjured our credibility and that really sucks! Thanks for your thoughts.

Dec 15, 2011 01:45 AM
Mike Carlier
Lakeville, MN
More opinions than you want to hear about.

If NAR were a corporation and reported a 20% inflated number, someone would probably go to jail.  I do not think the big cheese economist reported the wrong numbers by accident.  NAR continues to damage the credibility and professional reputation of its members. 

Dec 15, 2011 01:45 AM
Bob Davis
Right Move Real Estate - Huntington Beach, CA

Bummer huh? Lets not forget that the NAR in its infinite wisdom is still a business and they are going to present themselves in the best light possible. They are going to take the data they have and present it in their favor at all times. Its sad to think they have presented the info incorrectly but at this point the damage is done. My business is still on track here in Orange County, CA. So I wll keep on trucking!

Dec 15, 2011 03:19 AM
Bryan Robertson
Los Altos, CA

My biggest beef is the reporting of medians versus averages and not breaking down regional trends versus national.  If 20% of the regions are improving they won't be noticed in the national trend numbers until the general figure is over 50%. 

As for NAR, they're more focused on having members than reporting information that makes sense or reflects regional reality.  They also publish national trends and stand by flawed reports such as Case/Shiller.  What those people forget is that using paired sales and excluding all others in a downward market is biased to homes sold under duress by seller who have to sell.  That's why their numbers fluctuate so much and typically show a down trend in most markets.

Great post Cathy.  Very well put.

Dec 15, 2011 03:44 AM
Eric Kodner
Madeline Island Realty - La Pointe, WI
CRS, Madeline Island Realty, LaPointe, WI 54850 -

The article I read on this news item stated that Yun attributed the inflated sold figures to "duplicate reporting" of sales by Multiple Listing Services.  If that is true, it would be the fault of the MLS system, not necessarily that of the statistical department at the National Association of Realtors. 

According to CNN Money, Yun mentioned the Denver MLS as an example of how duplicate reporting happens.  He said, "Colorado Springs has their own database, but because the Denver market is nearby they may also list that home in the Denver database, so when the home gets sold, both Denver and Colorado Springs will say sales rose -- so that's genuine double-counting".

I read a lot of posts on ActiveRain which blame NAR for a wide variety of ills.  In this case, it may not be a matter or someone deliberately cooking the books, but rather just the fact that duplication between nearby MLS systems has made these figures look more favorable than they truly are.

Dec 15, 2011 05:34 AM
Cathy Criado
Criado Realty - San Antonio, TX
Making Real Estate Profitable

Thanks Bryan, i appreciate your comments and insight.

Eric - It seems you are good with research and I should have checked that out myself, but I got caught up in two competing member based organizations (WSJ is in terms of subscriptions & NAR) that I lost sight of looking for the cause. It helps in terms of how innocent that can be, but doesn't help in terms of the public harm or the actual outcome.  Thanks for sharing your information and insight.

Dec 15, 2011 08:23 AM
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

My client sent me this article yesterday, with the comment, "I'm not even sure I want to buy a house anymore."  Considering the response I emailed him, I should have made it a blog post.  Thank you for helping getting the word out there.

Dec 15, 2011 12:09 PM
Eric Kodner
Madeline Island Realty - La Pointe, WI
CRS, Madeline Island Realty, LaPointe, WI 54850 -

Thank you Cathy.

From the comments I read above, as well as the comments on another post about the same subject. it seems like nobody cares much about what caused the misleading statistics.

I read comments above about how "real estate is local" and "local market reports are so important".  But NAR got those statistics from local and metropolitan area MLSs and Associations.  So what people are failing to realize is that this is a problem which starts from the bottom up, every bit as much as it is a problem from the top down. 

The WSJ article clearly attributes the cause to several factors, including (1) MLS consolidation, (2) duplicate reporting of new home sales, and (3) duplicate reporting of sales which were "reported on more than one listing service".

So the local/state MLS system is broken and is possibly as much at fault for what happened as NAR is for believing those statistics. 

It's easy for the ActiveRain villagers to grab their pitchforks and torches, approaching the NAR castle with chants of "down with NAR".  But it's disappointing that more Rainers don't seem to be very interested in what's truly behind this mess.

Dec 15, 2011 04:29 PM
Brenda Mullen
RE/MAX Associates - San Antonio, TX
Your San Antonio TX Real Estate Agent!!

Unfortunately Cathy, I think NAR did us a huge disservice and although WE know the local stats, consumers are likely to listen to the bigger organization that in their mind, we all belong to.  It is very damaging.

As far as the diversify thing...I personally want them to buy Real Estate :)!  They can buy stocks some other time lol!  Congrats on the feature.

Dec 16, 2011 01:09 AM
Ben Ganje + Partners
Lakes Sotheby's International Realty - Minneapolis, MN
Minneapolis Market Leader

There is NAR and there is every single real estate agent out there who needs to speak to honesty and integrity.  At the end of the day this shouldn't stop any Realtor from understanding their role which is to articulate the local market to a buyer, seller or renter.

Dec 16, 2011 05:43 AM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Cathy - I think diversifying makes sense.  I also think you do a good job of pointing out the conflicts in NARs numbers.

Dec 16, 2011 03:34 PM