By the Numbers

I’ve been getting a lot of feedback from users out there questioning the housing numbers we report on CNBC. Yes, we do a lot of numbers: Existing Home Sales from the National Association of Realtors, Housing Starts and New Home Sales numbers from the US Dept. of Commerce, the monthly Housing Market Index of home builder sentiment from the National Association of Home Builders, just to name a few.

One user writes: “How honest are the NAR’s numbers? Days on Market? Median Price? etc. I have yet to see a major news network investigate such goings on. The REI commissions depend on strong numbers. How accurate is this data?”

Another, Michael Crespy, writes: “Although you periodically have a "housing bear" on the program, more than not, the program is filled with the NAR or NAB's "economists" who are no more than the HEAD cheerleaders for the housing industry!!”

Mr. Crespy, you’re right, they are the cheerleaders for the housing industry, but they are also economists whose sole purpose is to organize and present data on the industry. Interestingly enough, the Dept. of Commerce, which has no stake in the industry, has far higher margins of errors on its numbers than do the industry numbers. The NAR’s existing homes data, which are monitored by the Federal Reserve, has a 1% margin of error. Their data comes from a sampling of 40% of the MLS listings. Forty percent is pretty high in survey land.

Still, NAR’s chief economist David Lereah gets a lot of flak. He not only gets hate mail, he’s got his own hate site: (link). Actually, there are several not-too-savory sites on David. I called him this morning and asked, “Why are people so skeptical of you?” (That wasn’t exactly how I phrased it.)

“Because I’m a shill. Look, they’re basically saying, ‘You’re the Realtors, you’re in it for the money, you have to say the market is going well.’ What are you going to do?” says Lereah.

“When the market is good, we can say no wrong, and now the market’s down and they’re getting skeptical and they don’t believe it. To be quite candid, we all have really good housing models, and all we’re doing is putting the data in and generating the numbers. There’s nothing to hide. My members don’t get angry at me if I say sales are down 10% this year. I don’t get fired.”

David Lereah speaks the truth, but he’s also one of the best spinners I’ve ever met, and after 17 years in this business, I’ve met a lot. David always finds a way to turn a negative number into a positive outlook. The steep fall in sales is a “correction” to him. Falling prices are “healthy for the market.” He’s got a million of ‘em, but guess what, he’s also got real numbers.

Read the charts for October Existing Home sales and you’ll find sales down 11.5% from last year, supply up 51% and prices down 3.5%. None of this is good news for the housing market, but there it is in the NAR report in black and white.

Moving on to the home builders and the NAHB. I interview Chief Economist Dave Seiders pretty regularly, and he’s the first to say the builders are not feeling too good about the market. The current HMI index is at a decade low. It’s right there in print. It’s well below the median confidence level. There’s no hiding that.

Now before everyone starts yelling at me, YES YES YES, these guys will do their best to make the market look brighter. YES, they represent Realtors and builders and investors who want good results. Their quotes in the press releases are often nauseating, but when you look past the quotes, there are the numbers.

I asked Professor Susan Wachter from the Wharton School of Business, who specializes in real estate and has no personal stake in the direction of the market. I said, “Can these numbers be believed???”

Wachter: “All of these numbers are grist for the mill of interpreting what’s going on.
I think this time around actually there are good analysts. These numbers are being followed. National numbers that are produced by the commerce department and HUD are actually, these are a wonderful series. These are great indicators of real time, what actually is going on and I think in some ways they give us some confidence. The permit numbers are showing the builders are lacking confidence they’re pulling back, they’re pulling down to lows we haven’t seen in 9 years, that’s major so they are following the numbers they’re responding to the market and that’s what’s going to get us out of this slump."

She had no problem with the Realtor or the home builder stats either. Now I realize I’m going to get skewered for being some kind of apologist or defender of the industry.. One user wrote that all I do is interview experts and then pretend I know what I’m talking about. Well guess what, that’s what journalists do (and I do realize that journalists rank somewhere around lawyers nowadays.)

Here at Realty Check, we report the numbers, we talk to the industry leaders, we also talk to umpteen brokers out in the field, to economists who study real estate trends and to buyers and sellers who are trying to make sense of it all; then, for better or worse, we try to make some sense of it all. I confess, I do own a house, so there’s my bias; I’d like it to continue to appreciate. If you don’t buy what I’m reporting, that’s your choice.

Questions? Comments?