Long time readers know that I take exception to the MLS reports, and in particular to the reports from the National Association of Realtors. [OK, you only had to be a reader since yesterday to know that, but that's beside the point.]
Part of the problem with these reports is the willingness of the cheerleaders to torture the data rather than analyze it. We’ve been told the market has been "stabilizing" or "bottoming" for months, only to be told about a new "stable bottom" the next month.
Lousy analysis isn’t the only issue. Probably the bigger problem is the nature of the MLS. The MLS was designed as a tool to help agents sell houses, and not as a resource for researchers. Consequently, you can’t count on the "purity" of the data. Let me demonstrate: [Thanks L for your help on this one!]
Consider this home for sale in Glendale, AZ: [MLS#2744925]
4 bedroom, 2 bath, 1,865 square feet.
Then there is this home, also for sale in Glendale: [MLS#2744897]
4 bedroom, 2 bath, 1,865 feet.
If you look carefully, [And check the address on the listing] you will note that they are in fact THE SAME HOUSE. So what does this do to the statistics? This one house will be counted as two properties in the listings, and when it sells, it will count as two pendings, and then count as two sales. [And this isn't the only factor to skew listings- L sent me a list of properties from outside the state of Arizona and outside the boundaries of ARMLS- even some properties in Mexico- all listed in ARMLS, the MLS of the Phoenix area.]
No this isn’t some conspiracy to obscure the numbers.
As L frequently reminds me, it’s an agent’s job to sell houses, not gather data for the NAR. In order to give a property maximum exposure, a good agent might enter a home several different ways, or enter it in other geographic areas. For example, it might be entered once as having four bedrooms and a den, then entered again as a five bedroom.
So how does the NAR make adjustments for these sorts of issues? After carefully reviewing their methodology, I can conclusively tell you that I haven’t a clue. The NAR states that some of the problems with it’s data are:
- Changes in association/board/MLS physical jurisdiction
- Changes in MLS vendors and /or staff
- Lack of response by associations/boards
- Erroneous data
They also indicate that they "extricate" problematic data, but it’s not clear what they consider "problematic."
It is important to remember that the NAR does not actually total sales across the nation: [And they don't indicate how inventory is determined at all]
Each month, the Research Division of the NATIONAL ASSOCIATION OF REALTORS® receives data on existing-home sales (single-family, condos and co-ops) from local associations/boards and multiple listing services (MLS) nationwide. NAR captures 30-40% of all existing-home sale transactions with its monthly survey.
The monthly EHS economic indicator is based on a representative sample of 160 Boards/MLSs. The home sales data (raw data) is divided into the four census regions: Northeast, South, Midwest and West. The raw sales volume from the participating Boards/MLSs is carefully evaluated by NAR economists to ensure accuracy. Once the “problematic data” have been extricated from the sample, the aggregated raw volume figures are weighted to accurately represent sales activity for each region of the country. This is also called the non-seasonally-adjusted volume. The weights are benchmarked every 10 years to reflect shifts in regional demand.
In other words- they are extrapolating. Not a bad thing necessarily, but unlike the reports by the National Association of Homebuilders [which have their own issues] the NAR does not report it’s margin of error, which basically indicates how confident you can be that the difference is you are seeing is significant enough to be meaningfull, or just "noise."
In a post yesterday on Calculated Risk, CR indicated:
According to NAR, inventory declined in March by 1.6% to 3.745 million units. Other reports show inventory surged in March, so we will have to wait and see the numbers for April.
Is the inventory decline real, a function of variability, or just bad statistics? Given the source, I gotta vote for #3.
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Inaccurate public reporting can and does put publicly traded company officers in jail. I’ve said this before, if the real estate industry was held to the same strict standards as the securities industry, there would be a lot of people in jail.
Except the difference here is we aren’t dealing with a handful of stocks, we’re talking about the biggest single investment most families will make in their lives. How can discrepancies and data ‘dis-integrity’ like this be allowed?
But then, maybe I’m just cranky this morning…
AZKevan-
It would be really difficult to get an accurate report using the MLS data. [I would know- I try!]
At least when I do a report using this data, I try and list potential issues with accuracy, i.e. “not adjusted for inflation,” or “median may reflect the mix of houses sold, not same home appreciation,” etc.
Sometimes crummy data is all you’ve got, that’s why stating margin of error, methodology, etc. is so important.
Unfortunately most people are just looking for the soundbite, and that’s what they’re getting.
You’d think people would want to dig a little deeper before signing a 30 year contract.
The whole bedroom/den nonsense seems pretty sketchy to me. If it is an enclosed room with a door, a window, a closet, and no toilet, it is a bedroom. I guess that this one is within the letter of the rules, but I still would not do business with anyone so comfortable with subterfuge. Using different exterior photos is even sketchier. Why not just use the nicer photo(no car) for both listings.
Twist, you forgot a couple of other scenarios: two cancellations or two expirations.
The one good thing about lack of standards is that it still leaves some room for self regulation and a little mystery. From what I’ve been told by a realtor or two, the MLS is just a listing of houses that don’t sell right off the bat. If their are two entries for one house then it was keyed in twice for some reason or another. Maybe the seller is going with several different realty companies and a mistake was made.