NAR Chief Economist Lawrence Yun told Nightly Business Report anchor Suzanne Pratt yesterday that the association’s rebenchmarking of existing-home sales (EHS) data, which it released yesterday, only affects the number of home sales as tracked at the national level and has no impact on the number of sales tracked at the local level and no impact on the issue consumers care the most about: the value of their home.
Yun says the association’s method of tabulating sales nationally is based on the number of sales recorded by local MLSs and then run through a calculation that adjusts for the percentage of for-sale-by-owner (FSBO) transactions and other variables. Starting in about 2007, the number of FSBOs dropped significantly, as home owners that would have otherwise tried to sell their house on their own turned instead to real estate agents to help them.
Those additional sales were captured by the local MLSs but should not have been counted by NAR, because its tally had already factored in a certain percentage of FSBO transactions.
“What happened during the downturn was that the for-sale-by-owner market got crushed,” he said.
Yun said he expects both sales and prices to improve in 2012, and nothing in the rebenchmarking has any impact on either of those. “We are beginning to see an underlying trend where buyers are coming into the market and correspondingly inventory levels are falling, and inventory levels need to fall before prices can stablize,” he said.
The clip above excerpts about two minutes of the Yun interview with Pratt. The full interview, which runs about four minutes, is on the Nightly Business Report website.
When NAR releases its existing-home sales (EHS) numbers next week for the month of November, the figures will reflect what’s known as a rebenchmarking. This is an adjustment that researchers do periodically to help ensure the continued accuracy of their data sets. The federal government does it with its data sets, including its all-important calculation of the U.S. gross domestic product (GDP). Research entities do it with their data sets. And NAR has been doing it with its EHS numbers since it launched that data series in the late 1960s.
With this rebenchmarking, NAR is using a U.S. Census survey called the American Community Survey to calculate the number of annual home sales and create a new benchmark, or baseline, for tracking increases and decreases in existing-home sales. (It doesn’t just use MLS data because that data only captures home sales listed through the MLS, which is most but not all sales.) It then adjusts its baseline based on a number of assumptions, including the portion of sales that are for-sale-by-owner (FSBO) transactions.
Against this new benchmark it calculates monthly updates using MLS data. Thus, if sales go up 8 percent in the sample of MLS data, then NAR increases the sales against the American Community Survey benchmark by 8 percent.
This is the same process NAR used the last time it rebenchmarked its EHS data, about 10 years ago, although for that earlier rebenchmarking it didn’t use the American Community Survey; it used data from the decennial census long form. NAR used the long form because it provides detailed information from which NAR can base accurate home-sale estimates, and it would have used that form again this time but the U.S. Census Bureau stopped using the long form after the 2000 decennial census.
For consumers, the most important thing to know is the rebenchmarking has no impact on home price data. The changes only impact the number of sales. Nor is there any impact on local MLS home-sale figures. The only change is to the reporting of home sales at the national level.
In the video above, NAR Chief Economist Lawrence Yun talks with REALTOR® Magazine Editor in Chief Stacey Moncrieff about the why and the how of the rebenchmarking process. You can also learn more in a detailed Q&A he prepared.
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