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Figures Lie, Liars Figure

The National Association of Rattlers (NAR) reported today that sales of existing homes rose in November. Upon hearing the news, Steve Liesman (is that the best name ever for a financial talking head, or what?) proclaimed on CNBS that the bottom was in.

Oh really?

Let’s have a looky loo at the NAR press release and compare it with the facts.

Existing-Home Sales Rise in November, Market Likely Stabilizing

WASHINGTON, December 31, 2007 –

Existing-home sales rose slightly in November, indicating a stabilization in housing in the wake of mortgage disruptions earlier this year, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 0.4 percent to a seasonally adjusted annual rate of 5.00 million units in November from an upwardly revised pace of 4.98 million in October, but are 20.0 percent below the 6.25 million-unit level in November 2006.

Fair enough, they give us a year to year comparison which shows a 20% decline (actually 17.8% unadjusted, but who’s quibbling). Somehow they are able to conclude from that and the “seasonally adjusted annual rate” that the market was stabilizing in November. But what about the unadjusted rate? Actual sales were down 7.8% month to month. That “up 0.4%” is just seasonal adjustment hocus pocus.

Lawrence Yun, NAR chief economist, said the market appears to be stabilizing. “Near term, existing-home sales should continue to hover in a narrow range, just as they have since September, and that’s good news because it’ll be a further sign that the housing market is stabilizing,” he said. “Mortgage interest rates are near historic lows and the most current data shows decelerating price declines, along with a modest reduction in the number of homes on the market.” Disruptions in mortgage availability and pricing peaked in August, which caused sales to slow in subsequent months.

Sales hovering near rock bottom levels is good news? And about those “decelerating price declines, we’ll have to have a look at that idea!

The national median existing-home price for all housing types was $210,200 in November, down 3.3 percent from November 2006 when the median was $217,300, but there remains a downward drag on the national median as the mix of closed sales has shifted away from expensive markets.

In other words, everything would be great if higher priced markets would just start selling again.

“Just like the weather, there are large local variations in home prices,” Yun said. A quarterly examination of price performance on a metropolitan basis shows nearly two-thirds of metro areas are showing price increases. Among the many metros experiencing healthy local price gains are Farmington, N.M.; Reading, Pa.; Columbia, S.C., and Fargo, N.D.

Like the weather?


Farmington and Fargo? You bet! No point in considering those small, inconsequential metros like Los Angeles, San Francisco, Miami, and Washington DC, where prices are cratering. And as for the 2/3 of metros rising in price, I think they’re just lying, but maybe they have a lot more metros I don’t know about. Like Farmington. Wow. Who knew!

The S&P/Case-Shiller Home Price Indexes released this week was down 6.7 pct from from October of 2006, a record decline. According to, “the previous record was a 6.3 pct drop recorded in April of 1991, just after the 1990-91 recession officially ended. The three-month annualized rate of decline was 11.7 pct.” In their 20 city composite, not one of the 20 metros showed an increase in prices. Their 10 city composite showed 3 month annualized rate of decline of 11.7%.

But that was October, and the Realtors say things got better in November.

In my reports to subscribers of the Wall Street Examiner Professional Edition Housing and Real Estate Report, I regularly review data from, a service that collects the MLS data posted on for 55 of the largest metros in the US. Their data showed that just after Thanksgiving the average of the median listing prices of each of the 55 metros was down 5.5% on the year. As of December 24, that figure had sunk to -6.2%. The monthly price change in November was -1.5%. In December the monthly decline had accelerated to 2.2%. In December, one market showed an increase in price. 6 were unchanged. 48 were lower.

So much for stabilization.

Total housing inventory declined 3.6 percent at the end of November to 4.27 million existing homes available for sale, which represents a 10.3-month supply at the current sales pace, down from a 10.7-month supply in October. “Inventory is still high, and further reduction in prices may be required in some areas to induce buyers back into the market,” Yun said.

Inventory was down month to month, that’s true. They didn’t happen to mention that it’s always down in November. But they don’t bother to seasonally adjust the inventory data. Don’t worry, though. If the inventory figures continue to balloon, they’ll adjust those too.

Here’s another flaw– the way they look at inventory to sales ratios, comparing actual inventory to an adjusted sales rate to come up with months of supply at their seasonally adjusted (i.e. statistically inflated) sales rate. Let’s look at the actual inventory to sales ratio. The actual inventory to monthly sales ratio is now 11.01, a new record. In other words, only one out of every 11 listings in the MLS sold in November. Selling your house is like winning the lottery.

That’s the good news. The bad news is that inventory was up 12.2% from last November. The worse news is that the inventory to sales ratio is up 36% from last November.

Somehow, to the honest folks at the NAR, that represents “stabilization.” OK, in October, the ratio was 42% worse in 2007 than 2006. So I guess you could say that things are getting worse at a slower rate than they were last month. But that’s not the same as stabilizing. Until the inventory to sales ratio begins to shrink for a few months, I think it’s safe to say that things are not getting better.

NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said that Congress should expand affordable financing. “Consumers have some choices with safer conventional financing, but raising the limit on conforming loans would significantly revive home sales,” he said. “This would help creditworthy buyers in hard hit regions like California and Florida by greatly increasing access to low-interest-rate mortgages. NAR, as the leading advocate for homeownership, strongly urges lawmakers to act quickly on this important measure.”

I guess they are talking their book here. But here’s a novel idea. How about letting the market decide where prices should be without government interference. Then prices would fall to levels where qualified buyers could actually afford them. The logjam would be broken, all those listings would start moving, and the Realtors could start making a living again.

But of course that won’t work because Wall Street and all their institutional bagholders would have to absorb the losses on all that worthless paper they hold. That means that it’s likely that there will be intervention after intervention to prevent the price slide from getting worse. The likely result is that the market will just stay frozen for the next 20 years with inventories persistently high and prices just slowly eroding.

I guess that’s what the Realtors would call “stabilization.” I say let’s just recognize the losses now and get it over with. The sooner we do that, the sooner the market will get back to healthy fundamentals and begin to genuinely recover. That can’t be done without pain. One way or another a price will be paid for the excesses of the mortgage and housing bubble. Constant denial and constant propping will not change the equation, it will only extend the pain over a longer time.

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  1. Bubblemaniac

    Typical spin to suck in more people in what will be a generational housing bear market.

    Wow, the bottom is near…things are stabalizing…time to buy…

    Fund a Baby Boomer’s retirement and buy overpriced real estate today!

  2. edgar

    I hope prices stay high in CA and FL so all the scamsters can pay more taxes and insurance. That or they can live on the street looking at all the vacant houses. Twenty years sounds about right.

  3. cwd

    One would think that realtors would want an immediate drop to the market clearing price so that housing would start moving since most of their income is based on volume, although I think that a lot of the realtors are also real estate investors who now underwater.

  4. John Neal

    Did I not see last report that the report includes foreclosures taken back to the bank (or whoever the heck actually owns the loan) counts as a “sale”.

  5. darryl

    “Sales of existing single-family homes dropped 59 percent in Miami-Dade County compared to a year ago, and the weak demand pushed the median price down 4 percent.” This is “stabilization” Miami style.

  6. Lee Adler

    #6- John-

    Foreclosures are not counted as sales. The NAR data encompasses a sample of 40% of Multiple Listing Services and is restricted to single family units. It would be interesting to know just how that 40% was chosen.

    The various MLS’s compile their statistics from their own databases of listings and sales. Sales out of foreclosure may be included when it sells if the lender listed the property with a Realtor, in which case it would be included in the MLS.

    The NAR uses a 1999 statistical benchmark to adjust its results. I read the benchmarking document, but could not determine how the benchmarking might skew the data.

    The NAR’s sampling and reporting methodology are in a sense a black box. It’s not clear what the inputs are, or how those inputs are adjusted to arrive at the outputs. As long as the methodology is consistent, then at least we can observe trends on the sales volume. As far as pricing is concerned, I “suspect” that the data is heavily skewed to present a “best case”, or even false impression of reality.

    The raw compiled data on listing prices is a far better gauge of pricing changes in my view.

  7. Newt

    Thanks for reviewing NAR’s data and supposed analysis. I truly believe that NAR thinks no one will take the time to go through the data or question their spin so they feel very bold in making ridiculous claims. I’m hoping that you’ll show them as liars enough times to either have people stop listening to them or at least stop believing them.

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