Existing-Home Sales Overestimated by 14.3 Percent from 2007-2010, NAR Reports

December 22, 2011

The National Association of Realtors (NAR) on Wednesday (Dec. 21) released benchmark revisions to historic existing-home sales with downward adjustments to sales and inventory data since 2007.

Although rebenchmarking resulted in lower adjustments to several years of home sales data, the month-to-month characterization of market conditions did not change, according to NAR. There are no changes to home prices or month’s supply. The 2010 benchmark shows there were 4,190,000 existing-home sales last year, a 14.6 percent revision from the previously projected 4,908,000 sales. For the total period of 2007 through 2010, sales and inventory were downwardly revised by 14.3 percent. The revisions are expected to have a minor impact on future revisions to Gross Domestic Product.

“From a consumer’s perspective, only the local market information matters and there are no changes to local multiple listing service (MLS) data or local supply-and-demand balance, or to local home prices,” explained Lawrence Yun, NAR’s chief economist.

A divergence developed over time between sales reported by MLSs and sales determined by a U.S. Census benchmark; the variance began in 2007. Reasons include growth in MLS coverage areas from which sales data is collected, and geographic population shifts.

“It appears that about half of the revisions result solely from a decline in for-sale-by-owners (FSBOs), with more sellers turning to Realtors to market their homes when the market softened. The FSBO market was overwhelmed during the housing downturn, and since most FSBOs are not reported in MLSs, national estimates of existing-home sales began to diverge based on previous assumptions,” Yun said.

NAR consumer survey data in 2000 showed FSBOs accounted for a 16 percent market share, which fell to a record low 9 percent in 2010.

“In essence, Realtors began to capture a greater market share. In addition to a decline in FSBO transactions, more builders began marketing new properties through real estate brokers that weren’t completely filtered from the existing-home data,” Yun said. “Some property listings on more than one MLS, and issues related to house flipping, also contributed to the downward revisions.”


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