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*Or what I learned when I was investigating something else
I was enjoying a rare vacation from "the bubble" in Mexico when the BusinessWeek article by Peter Coy, which discussed my work on MLS accuracy, came out–and I did not have the opportunity to see it. Now that I have, I stand by both my comments and my data provided to BusinessWeek. I would also like to lay out for my readers what I explained to BusinessWeek–i.e. the difficulty with relying on data from various MLS services. I shared with BusinessWeek the results of my studies on the reports of three local MLS services: Phoenix, Tucson and Las Vegas. It appears to me that "adjustments" in MLS data may be indicative of errors in bookkeeping, and there may be an excessive dependence by consumers and Wall Street on the accuracy of this data. Here are the results of my studies:
PHOENIX
The source of my data for Phoenix is the ARMLS. Assembling the data was a rather tedious project, but if you care to follow the link to their website, you will see a list of reports. I opened all of them and entered the sales and listing data into Excel. I tried to "balance" the data, much as one might in an accounting statement. I assumed that the following formula was essentially correct:
"THIS MONTH’S INVENTORY" = "LAST MONTH’S END-OF-MONTH LISTINGS" - "THIS MONTH’S SALES " + "THIS MONTH’S NEW LISTINGS" - "DELISTINGS*"
(*"Delistings" is a term coined by our reader "Rebel," who clued me into the accuracy issue. Delistings would be estimated cancelled/expired and temporarily-off-market [TOM] listings. While different MLS services around the country vary in the amount of info they give the public, I know of none that report this information on a regular basis. While I have seen claims as to the "actual" number of delistings in Phoenix, these figures do not jive with the ARMLS reports.)
Admittedly, there are a couple of problems with using this formula. One is that nailing down MLS numbers is like trying to hit a moving target. There is no single source for data entry into the MLS–the data base updates as realtors update listings. Any report is a "snapshot" of the time at which it was done, and two reports of the same time period can look markedly different.
The other problem with the formula is the status of pending sales. When a listing is marked as "pending" it leaves inventory, and will not show up under "sales" until closing. This lag can last for months. In spite of these problems, though, as the ARMLS seemed to be consistent in their methodology, and this lag seems to shift only gradually over time, I believe the result here, while imperfect, is accurate enough for our purposes. This study will allow us to look at the reports of the ARMLS and assess their merits in general terms.
You can see my Excel chart by clicking here.
One of our sources has been pointing out to me how more homes were leaving the market due to "delistings" than sales. I assumed that the market would be less efficient over time, and the ratio of sales:delistings would gradually lessen over time. I thought I would graph that ratio, over time, to see what it looked like, and I was really surprised when I got a graph that looked like this:
Local realtor Ron Wilczek has updated his website, and shows that Gilbert home prices are down–on a square foot basis–again. The square foot selling price of a Gilbert home in December fell to $158.00. At $158/sq. ft., that’s 11.2% off of March’s $178/sq. ft. Here’s the graph:
