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How Counter-Productive is Realtor Association Spin?

Posted By Barry Ritholtz On March 25, 2008 @ 7:09 am In Data Analysis,Financial Press,Real Estate | Comments Disabled

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 [1], or the Home Builders Index [2], 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. [3] 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 [4].

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 [5], 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 [6], 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 . . .

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Previously:

Investing in a Post-Fact Society [7]    http://bigpicture.typepad.com/comments/2008/03/were-the-good-t.html

Sources:
Wave of Foreclosures Drives Prices Lower, Lures Buyers [4]
Oversupply Triggers Lenders’ Fast Sales; Mr. English Bids
JAMES R. HAGERTY and KRIS HUDSON
WSJ March 25, 2008; Page A1

http://online.wsj.com/article/SB120640573882561087.html

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Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2008/03/how-counter-productive-is-realtor-association-spin/

URLs in this post:

[1] ATA tonnage index: http://bigpicture.typepad.com/comments/2006/11/ata_tonnage_ind.html

[2] Home Builders Index: http://bigpicture.typepad.com/comments/2006/09/homebuilders_in.html

[3] Worst. Forecasters. Ever.: http://www.slate.com/id/2179605/

[4] Wave of Foreclosures Drives Prices Lower, Lures Buyers: http://online.wsj.com/article/SB120640573882561087.html

[5] yesterday: http://bigpicture.typepad.com/comments/2008/03/february-existi.html

[6] over a year ago: http://bigpicture.typepad.com/comments/2007/03/quote_of_the_da_1.html

[7] Investing in a Post-Fact Society: http://bigpicture.typepad.com/comments/2008/03/were-the-good-t.html

[8] Image: http://ad.doubleclick.net/jump/wbn.bigpicture/bigpicture;kw=wired;kw=blognetwork;kw=bigpicture;tile=2;sz=300x250;ord=123456789?

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