How Counter-Productive Is Realtor Association Spin? 30 comments
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One of themes we've looked at over the years is the spin that some trade groups put out on top of their data releases. Some trade associations, like the ATA tonnage index, or the Home Builders Index, simply put out the straight dope -- an unvarnished, unblinking look at their industries, so their members can better make informed business decisions with the available data.
Other groups massage the data, spin the message, and try to present their info in the most positive light -- regardless of the underlying data. They seem to believe that if only the public believes things are okay, it will become a self-fulfilling prophecy.
The National Association of Realtors falls into this latter category. They have been calling the bottom in Housing, well, ever since the top 2 1/2 years ago; their consistent claims of stabilization and price improvements later in the the year -- as prices have continued to slide -- have earned them the title of Worst. Forecasters. Ever. What is more damning, IMHO, is that they are not just wrong, but purposefully misleading for commercial purposes. I believe that is defined as Fraud.
Occasionally, they manage to find success -- but only when a complacent and/or ignorant financial press fails to do its job. Today, we see evidence of that in an embarrassingly incorrect front page story in the Wall Street Journal: Wave of Foreclosures Drives Prices Lower, Lures Buyers.
In a front page, 3rd paragraph snafu, the Journal writes: "On Monday, new data suggested that pressures like these are starting to drive prices low enough to attract some buyers back into the market. Sales of previously occupied homes jumped 2.9% in February from the month before, the National Association of Realtors said, the first increase since July."
As we noted Monday, that was not what the data stated at all: "Changes from January to February are measuring seasonal differences, not actual improvements in house sales." Can you imagine what it would be like if we reported retail sales from December to January this way? Headlines would misleadingly state: "Retail sales plummet 65%!" That is why with highly seasonal data series, the preferred methodology is to report year-over-year data -- not month-to-month variations.
And what were those numbers? The year-over-year data for existing home sales were DOWN 23.8% below February 2007 levels. That data point never found its way into the WSJ article at all. I cannot recall a more blatant misreporting of fact, or a larger or more embarrassing error in a front page WSJ article, ever.
While the NAR might be high-fiving each other over their successful deception at the Journal, they may wish to reconsider. As we noted over a year ago, many realtors in the field are finding the NAR tactics frustratingly counter-productive.
Why? It seems that realtors were having a hard have time convincing home sellers to price their houses more realistically. Even as home builders were slashing new-home prices to move bloated inventories, "many home sellers are still holding off, hoping - along with FAR and NAR - that prices will start moving back up soon." Hence, the impact of Tuesday's successful deception and incompetence on the part of the WSJ may ultimately be less flexible pricing of homes, negatively impacting sales.
Call it another Pyrrhic victory for the National Association of Realtors...
Previously:
Investing in a Post-Fact Society
Sources:
Wave of Foreclosures Drives Prices Lower, Lures Buyers
Oversupply Triggers Lenders' Fast Sales; Mr. English Bids
JAMES R. HAGERTY and KRIS HUDSON
WSJ March 25, 2008; Page A1
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This article has 30 comments:
This flowed out to many local realtors as well though. I saw brokers telling clients about what a great time it was to buy in 2005, meanwhile they were putting their own homes up for sale.
It is interesting to note that OFHEO also publishes an index that is much closer to Case-Shiller in that it removes mortgage appraisals etc and only includes final sales only paired-sales data but at last check the data had not been updated since March 2007 (see seekingalpha.com/artic... )
So what might their motivation be for putting a positive spin on the market be? It is a government organization and 2008 is an election year. Governments have a shameless habit of pumping up markets and economies leading into each election.... (see tradesystemguru.com/co... )
When looking at NAR and OFHEO statistics, it is important to remember the term caveat emptor - buyer (and seller) beware!
So why the rehash a year after? To keep the revolution going?
So besides the bitching what’s the fix?
PS: You must 21 to read the posting below.
Posted by mark mchugh, Mar 24 03:50 PM
Investing in a Post-Fact Society (a/k/a Were the Good Times a Mirage?)
seekingalpha.com/artic...
Tony –
I’ve really seen enough of your pseudo-patriotic drivel. When the powers that be use the flag to stuff their moral compasses in their rectums, decent people are outraged; jack-holes, like you, salute. Real Patriots seek justice first, and don’t look to pass their debts onto their grandkids. Cheerleading deficit spending and currency collapse to subsidize thieves and over-leveraged fools is about as American as Al-Qaeda wearing the stars and bars.
Yeah, I know, “50 years of investment experience”, yet here you are, frantically posting away, like a fifteen year-old girl on myspace.com. I think what you’ve really had is 6 months of experience, 100 times over. So tell us, brainiac, is this a bear market rally to dress up report card day (end of the quarter) or a true bottom? If you were any good, you’d already be out of the game, but your comments (and volume) reek of the desperation that comes from a bad balance sheet. Hoping for one more bubble to bail your sorry ass out. Maybe you’re hoping to unload some “investment” properties when things get better?
The only question I’ve really got for you is, are you an idiot who idolizes a fictitious crook or an idiot who’s name is actually Tony Soprano.
Your comments are only insightful in the vacuum between your ears. Inflict your “wisdom” elsewhere (the NAR could use some more shills). You are the disease, don’t try to pass yourself off as the cure.
Real Estate Spin
Government Spin
Accounting Spin
Wall Street/Analysts Spin
CEO's Spin
Budget Spin
Lawyer Spin
Mortgage Lender Spin
Loan Applicant Spin
Appraisal Spin
AAA Rating Spin
it's a long list
There is a grass roots movement with a small but growing group of appraisers that started in Southern CA, who have found a way to measure the bottom of the market and the timing. Led by George Dell, MAI, SRA of San Diego and Steven R. Smith, MSREA, MAI, SRA of Redlands. The next offering of their course will be in Rosevilled on 4/8-4/12.
Small groups from 12 to 30 appraisers at a time are being trained in a new level of Housing Market Analytics. These appraisers have skills that can be used to predict the future value change rate and direction.
This is a useful and insightful article. As Buffett says "you don't ask the barner if you need a haircut." By the same token, you don't ask a realtor (or their trade group) if its a good time buy a house. That said, the blunder in the Journal suggests a sad state of affairs in terms of fact checking.
Reporting such as this www.cnbc.com/id/238090.../
or this
www.cnbc.com/id/238146...
and those mentioned above fuel this unfounded optimism with the unintended impact of perpetuating and deepening the housing and broader economic crisis.
Separately, what is sad about this type of incessant hype is that real people are being impacted by it. I overheard a bellman at the hotel we were recently at in South Fla talking about the condominium he recently purchased. As if looking for reassurance he explained how ‘everyone is saying that ‘there is no better time to buy’ - the person he was speaking to was kind enough to assure him that owning a home can be a good long term investment – ironically this was the same hotel where Countrywide was embarrassed into canceling one of their recent events. www.cnbc.com/id/234231...
*(Existing Home Inventory)
www.hwmarketintelligen...
**(New Home Inventory)
www.hwmarketintelligen...
Keep up the excellent commentary.
We (the great unwashed investors) need a beacon in the wilderness.
Vox in Rama.
www.financialsense.com...
The following link is provided for no other reason than to illustrate just how complex the credit derivatives market is - it is an article by one of the pioneers of CDO / CDS modeling Dr. DX LI - some might call this an example of what has been referred to as a "weapon of mass financial destruction"
finmath.stanford.edu/s...
As a seasoned real estate broker I'm sorry to say I agree with most of your comments. What you miss is that most Realtors work for sellers and those sellers won't hire you if you are not an advocate for the value of their home. In fact, if you try and explain the facts of life according to Barry you get tossed out on your ear. Its going to take two more years for the decline to unwind because home sellers are slow to react to the market. Many are like a deer staring into headlights on a dark highway at night. They wait and wait but eventually jump out of the way and move on with their lives.
Keep up the good work.
Another one of my friends has started calling them
"Used home salesman"
My wife and I went to 5 different ones during the last year, and all said now was a good time to buy. LOL
The negative spin is totally counter productive and is putting a bad taste in the mouth of consumers.
The root of the problem is M-O-N-O-P-O-L-Y
The NAR controls the sale of real estate in America.
Is there a way that the average person who wants to sell real estate for others can get into the business without joining (kissing the ring) of the NAR?
The answer is NO.
What we are seeing is the result of no competition.
"You need three things to be successful: A smile, a gun, and a plan. If you have to give up one, lose the smile. If you have to give up two, lose the smile and the gun but never go without a plan". Al Capone
NAR is a Chicago bunch and long acquainted with Al. When the National Association of Exclusive Buyer Agents formed twelve years ago NAR's head attorney traveled to the conference and told them NAR would sue them if they dared form an association. They showed her the door.