How Counter-Productive is Realtor Association Spin?

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 yesterday, 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 datapoint 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 today’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 . . .



Investing in a Post-Fact Society

Wave of Foreclosures Drives Prices Lower, Lures Buyers
Oversupply Triggers Lenders’ Fast Sales; Mr. English Bids
WSJ March 25, 2008; Page A1



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  1. AJF commented on Mar 25

    Perhaps the biggest difference among the NAR and other trade groups (such as the home builders) is that these other trade groups represent entities that actually produce something tangible or quantifiable . . . the NAR represents salespeople, plain and simple; the NAR should be taken with as much credibility as the guy at the used car lot clad in white short sleeved dress shirt, cheap tie, and fake Rolex, “what’s it going to take to get you into this 4/2/3 TODAY!”

  2. cinefoz commented on Mar 25

    How Counter-Productive is Realtor Association Spin?, asked BR

    Reply: Not very much. At worst, it might encourage someone to buy a house. I don’t see this as a problem. Since prices are unarguably lower, the debate is only ‘how much lower can they fall and should someone wait?’

    The statistics appear to support the feelings of relief. One month does not create a trend, but a little good news being overreacted to so vigorously is pretty damn odd. Will a drop next month provoke victory laps and unrestrained joy?

    On the other hand, if housing prices continue to fall, then wealth will fall, consumer spending will fall, stocks will fall, and everybody except short sellers won’t do very well.

    Just as those here cry rivers about perma-bulls, the perma-bears have a nuttiness of their own. “Today is bad and tomorrow will be even worse, God willing” is not much of a motto to live by.

    Well, with hope, some news ways to steal trillions will be developed soon. A new bubble will form, pop, and an even bigger collapse of the economy will result. This will bring new chances to pray for a cleansing destruction of everything most people hold dearly.

  3. Doug commented on Mar 25

    We need a new tort: fostering of mis-information that causes real harm.

  4. steveeboy commented on Mar 25

    The NYT had the same story on the cover today, they included a chart with graph of the sales on a monthly basis going back a year or so and you can see exactly what is going on with the realtor spin.

    There is always a february jump in sales and this year’s jump is not as big as last year’s…

    I don’t think they make the explicit point that sales are down compared to last year though…

  5. jkw commented on Mar 25

    The numbers they report are seasonally adjusted annualized rates. At the bottom of the NAR press release, they have foot notes making the same point as you have just made explaining why they report seasonally adjusted annualized rates instead of actual sales rates (they do not say anywhere in their press release how many homes were sold in February). Your blog normally has good fact-checking, but you seem to have missed it this time.

    The month to month variations are theoretically meaningful to report. The changes may not be statistically significant or accurate. And they are only meaningful if the seasonal adjustments are done correctly.

    Since it was a leap year, February was about 3.5% longer than normal. If they failed to correct for this in their seasonal adjustment number for February, then a 2.9% increase is actually a decrease.

  6. commented on Mar 25

    Barry, I’d hope most of your readers have figured out by now to always beware of trade group spin. It’s unfortunate, but the MSM (mainstream media) passes this junk along because it’s easy to report (tailor-made press releases for quick turnaround) and because a number of journalists don’t understand the subject matter they’re covering. Personally, I think Diana Olick, the CNBC real estate reporter, is the exception. From the Chicago Tribune yesterday:

    “The condo median price in the city of Chicago was up 10.5 percent, to $314,900 from February 2007. ‘We see this increase as further proof of the resilience of the Chicago marketplace,’ David Hanna, president-elect of the Chicago Association of Realtors, said in a statement.”

    Median condo prices up 10.5%? Yeah, right. Probable explanation: lower-end condos weren’t selling due to potential homebuyers not being able to obtain financing. Only the high-end inventory was moving. Result- skewed numbers, trade group spin, and reporting at a level you would expect to see from high school newspaper staff.

  7. JP commented on Mar 25

    Why? It seems that Realtors were having a hard have time convincing home sellers to price their houses more realistically.

    That is the part that confuses me the most. Realtors are paid on a commission. Currently, sales are off 30% of peak, which has to make it hard to eat.

    You would guess that hunger would make them aggressive. Perhaps it’s just making them stupid.

  8. Douglas Watts commented on Mar 25

    Blame the Associated Press for this. Any professional reporter handed a press release from a trade group knows (or should know) they need to “de-spin” and “ground truth” it. The whole purpose of press releases is to (a) get your group into a news story (b) get the reporter to use your group’s message as the narrative and frame for the news story. On this story, the AP reporting chain was criminally lazy. Reporting quality in the U.S. is at its lowest ebb. Reporters just don’t give a crap what they write.

  9. Douglas Watts commented on Mar 25

    Here’s the Associated Press again, today:

    The National Association of Realtors said Tuesday that sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of just more than 5 million units. In the previous six months, sales had fallen, something analysts had been expecting again last month.

    The narrative has now been set into quick-dry cement.

  10. Chris D. commented on Mar 25

    Personally, I think we need to get past this particular recession, or housing slump, and begin looking at the bigger picture. Over the last decade or so the prices for housing in this county have got to be close to maxed out in a larger sense. I think a lot of the price jump was due to the fact that sellers corrected for a world of two-income households. Ten years ago, I think most houses in middle America were still priced “the old fashioned way,” assuming a primary wage earner with supplemental income from the spouse. Why price a house for $90K and sell it to a household with a primary wage earner who makes $45K if the household actually makes $75K and you can price it at $140K? (Here’s where the intermediaries like realtors come in.) What used to be “the wife’s” safety net income is now obligated income because the baseline price is higher. This will surely make for a more volatile market due to divorces and chronic job turnover leaving the remaining wage earner below the level needed to support the house. (Divorce and job-loss cycles should be included in the lenders’ risk assessments.) Income is relatively stagnant in this country for a large percentage of people at different points in time as industries rise and fall. Inflation around housing, food, and energy is now neutralizing what little wage growth there is for many of these same people. IMHO, the ability of prices to rise above the current median price (even as it declines) is going to far less elastic in the future than it was in the recent past. Don’t forget that Baby Boomer retirements are also going to slow down this game of musical chairs. Neighborhoods are going to have to start sorting themselves out into “good” and “bad” ones again (just like in the old days) with the good one’s recovering their value in direct proportion to their desireability and the bad ones plummeting toward their old 1990s prices. The age of permanent, universal price increases is over. Homebuilders and homebuyers will actually have to start using discretion again. Some people who bought recently are in for a world of hurt, but ain’t that America?

  11. pinhead commented on Mar 25

    this morning headlines ‘china rallies on the housing turn around’….unbelievable BS and spin. i guess all the foreclosures on my block have sold?

  12. Bob Abouey commented on Mar 25

    Barry, I am also wondering if you missed the fact that according to the NAR release, the numbers used for the comparison are “annualized” numbers that factor in seasonality. Note that they also make no attempt to hide the year over year declines. (BR: No, I did not miss that — we have discussed this extensively in the past. See yesterday’s commentary)

    From the second paragraph in the release:

    “Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.9 percent to a seasonally adjusted annual rate (1) of 5.03 million units in February from a pace of 4.89 million in January, but remain 23.8 percent below the 6.60 million-unit level in February 2007. ”

    Footnote (1) reads:

    “(1) The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.”

    Note I am not arguing whether this rise is statistically or otherwise significant, or that NAR’s seasonality adjustments are accurate, merely to the comment that these numbers do not account for seasonablity, to quote you: “Changes from January to February are measuring seasonal differences, not actual improvements in house sales.” Am I further missing something?

    BR: Yes, its their headline spin, which is typically belied by the underlying data. The media then lazily repeats the headline spin, and fails to include the actual year over year data — as the WSJ did today.

  13. Barry Ritholtz commented on Mar 25

    Hey Bob,

    How are those seasonality adjustments made? What was the raw data of total units sold?

    Can you tell me what statistical methodology was used, and how those adjustments impacted the numbers?

    Consider both the source, and the room for let’s just call it error: the monthly number is seasonally adjusted (god knows how) and then annualized (X 12).

    You sure you want to rely on that ?

  14. IdahoSpud commented on Mar 25

    REALTORS ™ are way over-represented in money losing real-estate investment, straw buyer, and flipper schemes.

    The one thing these schemes have in common is the need for ever-increasing housing costs (…er “values”). Turnover matters as well, if only for commissions of the less speculative REALTORS ™.

    It makes sense that their advertising arm would sound the all clear even as 500lb bombs continue to fall.

  15. judyo commented on Mar 25

    If this be fraud, what is it called when the Feds do it? War on Terror??

  16. James R. Hagerty commented on Mar 25

    Foreclosure Rate Outpaces Sales by Lenders

    Foreclosures are occurring at the highest rate in decades — and as a result, lenders are acquiring homes faster than they can sell them off.

    Last year, sales of foreclosed homes rose just 4.4%, while the supply more than doubled, according to First American CoreLogic.

    As of the end of last year, about 2% of all home loans were in foreclosure, or double the average rate over the past 28 years. It is the highest foreclosure rate since the Mortgage Bankers Association, a trade group, began collecting data in 1979. Lenders describe the current situation as the worst since the Great Depression.

    The heaviest concentrations of loans in foreclosure are in Florida, Nevada, Ohio, Michigan and Indiana, according to the Mortgage Bankers Association. Foreclosures also have been rising quickly in California, Arizona and Georgia.

    While those areas are being hit the hardest, it’s a nationwide problem. The foreclosure rate at the end of 2007 was up from a year earlier in every state except Mississippi, where it was flat.

    Some homes in foreclosure won’t end up owned by banks because borrowers will cut a deal with lenders to ease the loan’s terms, allowing them to catch up on payments.


  17. JustinTheSkeptic commented on Mar 25

    Spin, this whole market is nothing but spin…we have John Law, and Duchess of Orleans, running the show – print some more! My question is when does Napolean arrive?

  18. Douglas Watts commented on Mar 25

    For a highly seasonally driven statistic like home sales, it seems to me the only meaningful comparison is Feb. 2008 to Feb. 2007, etc. Feb. 2008 home sales are 5.03 million. Feb. 2007 were 6.60 million. This is a decline of 23.8 percent.

    Why not just compare Christmas 2007 sales to Arbor Day 2007 sales and note the huge uptick ???

  19. DonKei commented on Mar 25

    The reason realtors don’t like all this happy talk is that they know the properties won’t sell unless prices come down, and all they care about are sales. They’d gladly take 6% of $200,000 instead of 6% of nothing when the asking price of $250,000 never yields a sale.

    In that regard, we have more evidence that the NAR is profoundly incompetent, even at serving its member’s interests. Their members make more money the more transactions, and that works whichever way the market prices go. That the NAR thinks its best role is as cheerleaders for price appreciation is utterly misplaced and reflects a basic misunderstanding of their business.

  20. JustinTheSkeptic commented on Mar 25

    Why the hell does CNBC have Crumer on in the morning now, is his ratings really that high? This market/country is going to hell in a hand-basket.

  21. Bob Abouey commented on Mar 25

    Barry –

    No, I can’t answer those questions, as I acknowledged in my post.

    But your article did not address whether the NAR seasonal adjustments were appropriate, biased, or whatever. Your article’s thesis was that NAR and the WSJ were erroneously focused on the Feb / Jan increase when that increase was purely seasonal. If the source of the data is seasonally adjusted, that thesis is wrong. (BR: If we do not know how the seasonal adjustments are made, we cannot unequivocally make that statement as to the impact of their adjstments).

    I agree with your overall concerns about NAR not providing its raw data and think the amount of focus on these numbers (including in a front page WSJ story) without more details on the adjustments / assumptions made in annualizing the numbers is bad press. But, my sense is that in this case you may have jumped to the conclusion you wanted (NAR is a bunch of clowns who didn’t realize / admit the increase was purely seasonal, and the WSJ fell for this) rather than doing a little more digging and having a slightly less sexy headline story (NAR claims to seasonally adjust the data but doesn’t share its methodologies, and given that they are an industry trade group one therefore should be very skeptical that a 2.9% “jump” is accurate or meaningful).

    Still, I highly respect your work, first thing I read after the WSJ each morning.



  22. G commented on Mar 25

    “The year-over-year data for existing home sales were DOWN 23.8% below February 2007 levels”

    And how does that compare to January’s year-over-year numbers?

  23. Chris commented on Mar 25

    Very interesting post. Thanks for cutting through the BS and spin that often passes for economic news.

    I get a kick out of these commercials the NAR is running in my area (Bay Area-NorCal). It’s a really pro-home buying ad, which in itself is fine. It’s the part where they say that, on average, home prices double every ten years which leaves me scratching my head.

    Can you imagine if stock brokers advertised their services by stating anything remotely similar? Commodities dealers?

  24. Linda P. commented on Mar 25

    Chris D.

    Excellent post here!

    I completely agree with your comments about housing priced for 2 wage earners…

    Housing will have to drop dramatically to get back to one wage earner levels of affordability….esp. here in Maine!

    Maybe we should all start looking at commune living..


  25. Bob Abouey commented on Mar 25

    NAR does share a fair amount of raw data here:

    In particular, they describe the methodology for their seasonal adjustments (“The annual rate for a particular month represents what the total number of sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonal adjustments, which are determined by using the X-11 Variant created by the Census Bureau, are then used to factor out seasonal variances in resale activity.”) I confess to having no idea what the X-11 variant is.

    However, they also provide the non-seasonally adjusted numbers in pdf and excel. And here’s the kicker – non-seasonally adjusted numbers show a 12.2% increase month over month, and 19.4% YoY. So the Seasonality adjustments applied by NAR actually result in a MORE conservative growth rate than the non-seasonal numbers.$FILE/EHSreport.XLS

    So the thesis that NAR overplayed a seasonal uptick appears, with a little more factfinding, to be categorically wrong. Its still possible to argue that their seasonality adjustments are not well done or sufficiently disclosed, but again, not the original thesis…

  26. Bob Abouey commented on Mar 25

    One clarification – my comment “thesis that NAR overplayed a seasonal uptick appears” was meant to refer to the argument that NAR showed an uptick that was due to a typical season shift and used it to indicate normalized growth. If, in fact, the numbers are not only annualized to account for seasonality, but that annualization results in a lower growth rate than the raw numbers, then it seems categorically wrong to argue that they were being purposefully misleading solely with regard to the the seasonal aspect. i.e. if their goal was to overplay a seasonal uptick, they would have used the raw numbers.

    I am not arguing that NAR did not overplay a single datapoint as indicative of a recovery.

  27. Jonathan J. Miller commented on Mar 25

    Hi Barry – I was appalled by the NAR existing home sale press release as well.

    What’s worse was watching business news last night and reading news stories this morning all touting the idea that the NAR numbers may suggest we have hit bottom. Are you kidding? Hello? What about the credit market? Prices have dropped but its much more difficult to get financing.

    What single piece of data in the NAR research site is consistent with the press release headline? None! Amazing. And unethical.

  28. Albert Miller commented on Mar 25

    Your article concerning NAR spin is “right on point.” For months now I have read countless articles about mortgage banker and mortgage broker corruption, but have not read much about the insidious methods used by Realtor groups to influence home valuations and the outcome of credit decisions.

    Mortgage lenders to a great degree exist on referrals from Realtors. The threat of being cut-off by an individual real estate company or agent is a factor regarding some valuations and credit decisions that is not easily measured, but upon reflection may be prevalent.

    It would be interesting for an investigative journalist to pursue the creation of a factual article that exposes the ramifications in the current housing debacle of vertical integration of real estate companies with mortgage brokers, lenders, closing companies as well as the methodlogies used in referrals to various types of lenders.

    Furthermore, a discussion of the possible antitrust violations by the NAR and their impact on real estate transaction would be enlightening. The NAR is a strong lobby and has for years successfully influenced legislation regarding RESPA and other matters oftentimes to their advantage. (They certainly would argue that what is good for them is good for the public.)

    I trust my comment will promote lively discussion!



  29. Bill commented on Mar 25

    This February is a leap year — there was an extra day — there’s your 3% !

  30. winjr commented on Mar 25

    “”The year-over-year data for existing home sales were DOWN 23.8% below February 2007 levels”

    And how does that compare to January’s year-over-year numbers?”

    January ’08 sales were down 23.4%, YOY.

  31. daisycolorado commented on Mar 25

    If NAR’s objective was to give a boost to prices, they have been as ineffective as a cheerleader as they have as a forecaster.

    I don’t see media spin by trade associations or other’s having much impact on much of anything other than the credability of the spinning organization.

    We put way too much stock in the power of the media and way too little in the common sense of the common man.

  32. matt schulte commented on Mar 25

    NPR used the same “month-to-month” increase in sales in their business news report this morning; likely based on the WSJ story?

  33. SINGER commented on Mar 25

    it cant be FRAUD unless the mislead parties reliance on the intentionally misleading statement is REASONABLE:

  34. Bob Smith commented on Mar 25

    In my area of Michigan, where we have been hit very hard with this downturn, sales numbers *are* up. That’s the number of sales, whereas the sales prices (avg and median) are still down. We think our number of sales is up because we were one of the first to get hit and sellers now understand that the prices have to be proper to sell. How much up are we? 18% for the period of Jan 1 – Mar 24, when compared to 2007. Time on market is down slightly for that same period, 141 days on market vs 147 in 2007. Not great considering how dismal 2007 was, but we’re happy to see an improvement. Of course, that’s just our one area and is not representative of Metro Detroit or Lansing or Flint, the nearest largest Cities.

  35. portland Refugee commented on Mar 25

    Barry – Nice post!

    I guess the fiduciary responsibility doesn’t apply to the NAR.

  36. portland Refugee commented on Mar 25

    P.S. Why not just get rid of realtors and instead pay a reasonable flat fee for listing the property, administering documents, etc. This way a seller / buyer can save the (usually unearned) 6.% sales commission. If sellers don’t have to pay such fees, maybe it will help offset any losses……

    I’m a big proponent of Redfinn

    Disclosure: None what so ever.

  37. Cindy commented on Mar 25

    I believe the builders trade groups have produced plenty of their own spin, too. Builders groups have given money to their members to run “buy now campaigns” similar to what the realtors are doing. Also, the builders alternately claim to “see bottom” or that the world is about to implode if house prices don’t start “recovering” (i.e. going back up to unaffordable levels) soon. All of this seems designed to manipulate the public, angle for a govt bailout, etc, as it suits their current needs. The press also picks up on building industry press releases and repackages them as “news,” which shows lack of real journalism and/or a fear of losing advertisers’ (builders, realtors) dollars if they speak the truth. The kicker is that both the NAR and NAHB have blamed the media at varying times for the whole housing crash. Thankfully, that tactic was met with rounds of laughter.

  38. Drew Yallop commented on Mar 25


    Wonderful post. Statistically it is kid’s stuff but the “experts” continue to get it wrong (intentionally?). Has WSJ become just a shill for the Street?

    Drew Yallop

  39. xav commented on Mar 27

    I thought Barry was just sucking up to CNBC. Apparently he appears to be serious, which in some ways is even worse.

    How can anybody with a brain believe Cramer on this? Does Barry think that the guy asking the question about BSC was a hedge fund manager writing to Cramer for advice? LOL

  40. West Toronto realtor commented on Mar 31

    Somebody said:”The only statistics I believe are those which were falsificated by me.” And I believe numbers are important, but intuition and feelings too. If you are in business for some years, like we in West Toronto realtor, you know that’s something going on even without numbers. And if these agencies and institutions really change results deliberately, the loss of confidence will be their path to grave…

  41. The Big Picture commented on Apr 10

    WSJ: “Inflation is back”

    I’d like to point out a new feature in the usually astute WSJ: Printing erroneous information on the front page. Last month, in a front page, 3rd paragraph snafu, the Journal reported a 2.9% month-to-month change in existing home sales — a seasonal fa…

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