Gaming the Data: Realtors Fudging the Numbers

As if the NAR data wasn’t gamed, massaged and otherwise manipulated by the reportage of local realtors themselves: It turns out to be even worse than I imagined.

From a South Florida paper, we learn that local realtors are refusing to submit ALL THE DATA to their regional Board of Realtors, because doing so would dilute the nicer parts of town with lower-priced and worse-performing neighbors:

"The Naples Area Board of Realtors has long wanted to report that city’s results undiluted by lower-priced and worse-performing neighbors.

In fact, for the past few months, the board has refused to submit its sales and price numbers to the Florida Association of Realtors for its comprehensive monthly reports.

Marla Martin, an FAR spokeswoman, said the Naples board — representing the wealthiest median home sales prices in Florida — had raised issues with the state association relating to the presentation of the board’s sales and price data."

Can’t have those crappy neighborhoods affecting our overall sales data, can we?

Statistics published in the trade association’s "Sarasota Realtor" magazine had this footnote: Data may "include some listings in Manatee, Englewood, Venice and other areas." For shame . . .

THis  is merely one of the many different ways that Realtors have been playing with their data: First, a slow selling house can get pulled off of Multiple Listing, and then relisted with a different MLS number and at a lower price. That makes the overall time-to-sell appear much better than it really is. The mulligan can take months or even years of time-on-the-market-to-sell.

This game also improves the "Percentage of asking price recieved" number. A $600k house that sold for $450k is 75% of ask, versus the same home relisted and asking $500k — and getting the same $450k; that’s selling for 90% of asking price.

Of course, all of this is irrelevant to the rising tide of Foreclosures:  while several private and state efforts have been made to reduce the increases, the bottom line is that there are presently millions of homes occupied by people who cannot afford them. Changing an ARM to a 30 year fixed isn’t going to alter that.

And, as the nearby chart reveals, its not just "Sub-prime" mortgages — "Alt A"s are seeing a nice spike in late payments (60 days overdue) and defaults too . . .


Realtor groups may quit statewide reports
Herald-Tribune, June 26. 2007 4:49AM

Subprime: Point to Where It Hurts
Steps to Modify Loans And Avert Foreclosures Has Investors Clashing
WSJ, June 29, 2007; Page C1

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  1. Neal commented on Jun 29

    S&P, Moody’s Hide Rising Risk on $200 Billion of Mortgage Bonds :June 29 (Bloomberg) —

    Standard & Poor’s, Moody’s Investors Service and Fitch Ratings are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans….

    “You’ll see massive losses from banks, insurance companies and pension managers,” said Joshua Rosner, a managing director at investment research firm Graham Fisher & Co. in New York and co-author of a study last month that said S&P, Moody’s and Fitch understate the risks of subprime mortgage bonds. “The longer they wait, the worse it’s going to be.”….

    Of the 300 bonds in ABX indexes, the benchmarks for the subprime mortgage debt market, 190 fail to meet the credit support standard, according to data released in May by trustees responsible for funneling interest payments to debt investors.

    Most of those, representing about $200 billion, are rated below AAA. Some contain so many defaulted loans that the credit support is outweighed by potential losses. Fifty of the 60 A rated bonds fail the criteria, as do 22 of the 60 AA rated bonds and three of the 60 AAA bonds.

    All but five of 120 securities in BBB or BBB- rated portions of the mortgage-backed securities would have failed S&P’s criteria, according to data compiled by Bloomberg….

    “Don’t misunderstand me: I’m not saying these others are performing great,” Robert Pollsen, a director in S&P’s residential mortgage surveillance in New York, said in an interview last month. “And they certainly might warrant our attention several months from now, which obviously we’re going to do.”….

    `That’s like saying these trees are just fine as there’s a forest fire on the other side of the hill,” said James Melcher, president of money-management firm Balestra Capital Ltd. in New York, who runs a $105 million hedge fund.

  2. James Bednar commented on Jun 29

    Anyone interested in some real-life examples of “relisting”?

    ## Meadowbrook Rd
    Short Hills, NJ

    MLS# 2253723
    Listed, Mar 05, 2006 – $879,000
    Price Reduced, May 01, 2006 – $829,000
    Price Reduced, Jun 05, 2006 – $795,000
    Withdrawn, Jul 13, 2006

    MLS# 2299446
    Relisted, Jul 14, 2006 – $795,000
    Withdrawn, Sep 07, 2006

    MLS# 2317848
    Relisted, Sep 09, 2006 – $745,000
    Sold, Oct 20, 2006 – $705,000

    The MLS data would show this sale taking place in approximately 2 months, for 95% of the asking price.

    In reality, the home took approximately 7 months to sell, and sold for 80% of the original asking price.

    Just for kicks, this home was previously sold on Jun 15, 2004 for $755,000. In two years the seller managed to lose more than $100,000 after accounting for commissions and fees.


  3. James Bednar commented on Jun 29

    Here is another example.

    ## Knollcroft, Bernards Twp. NJ

    MLS# 2245668
    Listed, 02/13/06 – $1,165,000
    Price Reduced, $1,115,000

    MLS# 2268283
    Relisted, 4/18/06 – $1,112,500
    Price Reduced – $969,900

    MLS# 2324175
    Relisted, 09/26/06 – $969,900
    Price Reduced – $899,900
    Sold, 06/05/07 – $870,000

    MLS stats would show: 150 days on market, sold for 90% of original asking.
    In reality, took more than double that time to sell, and sold for 75% of the original asking price.


  4. Anitra commented on Jun 29

    When we were house-hunting this spring, we saw a lot of houses in central Massachusetts that had been pulled and re-listed. Most of them had been on the market for 6 months or more. For many of these, the owner had repeatedly lowered the asking price, but had not taken care of the house over the winter. More than once we saw burst pipes and open windows with snow drifted in. The flippers still couldn’t stomach taking a loss on the property.

  5. michael schumacher commented on Jun 29

    Anyone else see the glaring paralell between the sellers of homes and the owner’s of the CDO mess??

    They both think it’s worth X when it most certainly is not. At least the home sellers have a market to sell in only if they wised up and dropped the price because make no mistake homes ARE selling if they are priced correctly.

    We can’t say the same about the CDO mess.


  6. Kp commented on Jun 29

    It’s the Peter Pan syndrome….If I just keep my happy thought I can defy gravity or even mean reversion!

  7. Stuart commented on Jun 29

    a ponzi scheme, a total scam, a complete facade enveloped in deceit and lies governed by spinmasters and fraudsters and willfuly blind. Pretty much wraps up what the foundations of the whole mortgage, investment banking and credit market. DIt’s clearly doubtful this is just an insolated case, yet so many willing to just dismiss examples like this and not reflect about the implications. It’s bad news, we don’t talk about bad news do we. In the end, we’re no different than anybody else in the world. Any talk about operating at higher standards down the drain. Threaten to dissolve our financial security blank, not matter how false it is, we resort to lies, cheating, fraud whatever just like a common cheat in New Delhi or anywhere else for that matter. Disgraceful.

  8. Christopher Laudani commented on Jun 29

    But on the other hand, they ain’t buildin’ anymore land! Hahahaha

  9. GerryL commented on Jun 29

    I have wondered about the data from the NAR. I have sold two homes in the last few years and dealt with many realtors. I don’t like to generalize but I found many of them to be ethically challenged.

  10. Flic commented on Jun 29

    Go figure. The housing market in Sarasota/Bradenton, Ft Myers and down through Naples are an absolute mess and the Sixpercenters will do whatever they can down here to spin things positive. They weren’t complaining when housing was putting up 40%+ yoy figures but now that these markets are down a solid 20-30% they don’t want to report….LOL. The RE industry is in dire need of an overhaul but I think that will happen on it’s own as this trainwreck plays out over the next 5+ years….

  11. TexasHippie commented on Jun 29

    Thanks for the NJ details James. I’m likely to move there at this time next year. Any ideas how I can track the overall NJ trend and pick a good area to live for a pricing bottom / rebound? Or are we looking at several years of continued (albeit slower) declines after this sudden drop?

    As with Barry, I’m perfectly happy paying rent while the market slaps some sense into realtors, flippers, and average-joe-momo-jockeys.

  12. anon commented on Jun 29

    I have seen several instances in the Boston area where the selling price reported by the realtor exceeded what was recorded on the deed. Sure, there can be error in data entry, but consistently? Not surprising that the Mass. association of realtors reported YOY gains in price of .7% compared to a YOY decline in the Boston Case-Shiller index of 4.5%.

  13. JAC commented on Jun 29

    With regard to NJ property values, I suppose “it depends” isn’t a very comforting answer, but… it depends.

    The question, from what I’m seeing, is how bad does it get with regards to foreclosures being blown back into the market, how hard does credit tighten, and what is the public sentiment. We’ll only start to have a rebound when everyone is convinced real estate is actually a toxic wasteland you don’t want to be in.

    Right now we’re still clearly in the denial stages (see Barry’s post above…), so nowhere near the despair / depression level you need to start bouncing back in terms of typical bubble psychology. With that said, if you intend to be a long-term owner, it’s almost a certainty you can find a smarter than average seller, ideally in a must sell position, and get a deal that will pan out as at least average in the long run. Just maybe not the short run.

  14. VJ commented on Jun 29

    its not just ‘Sub-prime’ mortgages — ‘Alt A’s are seeing a nice spike in late payments (60 days overdue) and defaults too

    I made this point a long time ago. The idea that this was just a problem with the ‘Sub-prime’ market was merely denial.

    Tinker Bell says clap louder, dammit.

  15. VJ commented on Jun 29

    ManhattanGuy posted:

    Core consumer prices increased just 0.1% as expected in May, the Commerce Department reported Friday, leaving core inflation within the Federal Reserve’s comfort zone for a second straight month.

    Ya, nobody buys food and energy anymore. They can’t afford the skyrocketing prices.

  16. Kevin Rooney commented on Jun 29

    It fascinates me how our economy is becoming more and more centered in information (rather than labor or physical capital) and at the same time, the technologies for contaminating information move ahead too.
    Is it really possible to run an advanced information economy based on supposedly accurate private information (for example intra-corporate information) while so much of public information is prostituted (high class call girl-ed at best and crack whored at worst)?
    Isn’t this like a third world city where the general water supply is polluted but the well-off have private filters? Even the well-off still get sick more often than in cities with proper public water.

  17. Sherman McCoy commented on Jun 29

    Score one for the Case-Schiller Index. It’s not perfect, but it’s the best we’ve got, and leaps and bounds ahead of what the Realtors put out. Incidentally, anyone notice the new CSI futures that have started trading? You can buy contracts on the major metro areas for up to one year ahead (e.g. May 2008 expiration for the CSI metro released then, which would account for sales through 1Q2008). These seem to me to be something to watch. Right now they are predicting a 3% down across the board one year ahead. Not to mention that it’s just pretty cool to buy a futures contract for “CSI: Miami”.

  18. Stuart commented on Jun 29

    From Bob Hoye

    “Freddie Mac says that the subprime slump is contained”
    “Fund managers says the whole subprime mess has been basically looked over and not taken as a big concern.”

    This is the orchestrated response by Inv banks and gov officials. Pretend it’s not there,proceed with business as usual since it will only explode when we try to diffuse it. So do nothing to attract comment or attention and it’ll go away.

  19. Si commented on Jun 29

    Ah Realtors, you’ve got to love em, I think its just great! how they put an ! after everything they sell as in……

    Character crack den! with holes in the feature brick walls! and the ladies of the night walk right past your door, just whistle!…….This won’t last long…Dammit!

  20. Winston Munn commented on Jun 30

    Quote: “Core consumer prices increased just 0.1% as expected in May, the Commerce Department reported Friday, leaving core inflation within the Federal Reserve’s comfort zone for a second straight month.”

    And your point is?????

  21. drsqueeze commented on Jun 30

    “Bolivian immigrants Marcelo Ortega, a dump truck driver, and his wife, Jenny, who cleans houses, bought a brick-front Colonial in Herndon for $549,000 in February 2006. The payments are $4,200 a month, which grew unbearable as residential construction work slowed and Ortega’s income dropped.”

    I bet they got a teaser rate which then ballooned to $4,200. It’s hard to believe they’ve already paid ~$40,000 on this house.

  22. Michael C. commented on Jun 30

    “Bolivian immigrants Marcelo Ortega, a dump truck driver, and his wife, Jenny, who cleans houses, bought a brick-front Colonial in Herndon for $549,000 in February 2006. The payments are $4,200 a month, which grew unbearable as residential construction work slowed and Ortega’s income dropped.”

    Wow, that is one shitty loan. $4,200/month for $549k is just awful.

  23. Louisville real estate commented on Aug 6

    That’s not very surprising to me. I actually used to live in Fort Myers (right by Naples) and now, after the bubble burst I really am not at all shocked.

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