New Doubts Over Housing Data

AP

Most consider President's Day weekend as the official start of the spring housing season.

There is, therefore, no more crucial time than now to have reliable data at our disposal for home sales, prices and inventories.

How else do buyers, sellers and investors know how to proceed? Unfortunately, the housing crash itself has undermined the veracity of those readings.

With the boom and the bust came the attention. Housing brought our economy down, and in doing so, boosted itself to the headlines. As with any big story, a cottage industry sprang up around it. Data providers came out of the woodwork, and as online sale and foreclosure web sites proliferated, so too did their ability to add to that data pool. The result is double edged: On the downside, some data providers are less-than accurate, but on the upside, their sheer numbers provide a system of checks and balances, tempering the most outrageous assertions.

So it seems sort of appropriate that today, as a new controversy swarms around potential errors in home sales figuresfrom the National Association of Realtors, the exalted and much-contested S&P/Case-Shiller Home Price Index is released.

It reports that home prices are dangerously close to an official double dip. Other data providers have been asserting recently that S&P/Case-Shiller is too bullish (and of course too bearish).

As for the Realtors' data, I find this one more disturbing. While some I have spoken with today call the claim by CoreLogic (a housing data provider) that the Realtors overestimated home sales in 2010 by almost 1.5 million, "overblown," the Realtors themselves admit there is a problem. They are "re-benchmarking" their sales calculation process.

"The last re-benchmarking to the existing-home sales series was based on 2000 Census data, so NAR is undertaking a re-benchmarking using independent sources," says NAR's Walter Molony. "We are consulting with various outside housing economists, government agencies, and some academic experts on the methodology to determine if there is, in fact, any drift in NAR’s existing home sales data, and, if so, by how much."

Molony says at this point they believe any drift in the data to be "relatively minor," and he goes on to say CoreLogic's assumptions may be "too high." Bottom line, though, if NAR overstated sales, then inventories are far higher than we think they are (inventory, or months supply, is based on a calculation of properties for sale and the current sales pace). We already have a great deal of uncertainty in the inventory numbers because of the so-called "shadow inventory" of foreclosures and bank owned homes.

Why do all these numbers matter in the real world of Sunday open houses and local market closings? Because sales and inventories drive prices and they drive expectations...the latter, perhaps, more important in the current market where consumer confidence is all but non-existent.

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