Existing Home Sales – An Ambiguous Term Explained via the NAR
By Robert Freedman, senior editor, REALTOR® Magazine
In response to media coverage about the calculation of existing-home sales, NAR Chief Economist Lawrence Yun yesterday walked reporters through the association’s methodology for calculating its monthly EHS figures as part of his regularly scheduled press conference in Washington.
NAR each month collects home-sale data from a sampling of MLSs around the country. That monthly data is compared against the previous month’s data to derive the upward or downward shift in the home sales pace. Thus, if the participating MLSs report 5 percent fewer home sales, when all of their data is tabulated on a national basis and seasonal variations are accounted for, then NAR’s monthly EHS report reflects that.
To anchor its data, NAR every 10 years compares its figures to the findings of the decennial census, which up until 2000 sent out a “long-form” questionnaire to U.S. households to generate rich data sets on household activity, including home buying. In 2000, that long-form census identified the home sales figure at 5.2 million, and NAR “rebenchmarked” its EHS data sample based on that number.
Such periodic adjustments are standard among researchers to maintain the accuracy of any data series that relies on extrapolations from a baseline. In 2000, NAR adjusted its data by 13 percent to bring it into alignment with the census data.
NAR is now developing a new way to rebenchmark its data, because the Census Bureau no longer sends out its long-form questionnaire as part of its decennial census, leaving NAR without that data set to use as its rebenchmarking standard.
Yun said he is convening a panel of some 20-30 economists and others who follow home sales on a regular basis for their input as NAR puts in place its new rebenchmarking procedure. Depending on the procedure that’s used, NAR could rebenchmark its MLS data samples more frequently, possibly as frequently as every two years or even every year.
More frequent rebenchmarking could help minimize the statistical “drift” that occurs in any regular sampling of data. Yun said he can’t predict how much, or in what direction, EHS data has drifted since the 2000 rebenchmarking, but that some degree of drift is expected. Some MLSs have consolidated, markets are seeing fewer for-sale-by-owner transactions, and some sales might be appearing in more than one jurisdiction because agents are increasingly listing homes in more than one MLS: all of these are possible variables that could lead to drift in EHS data trends, Yun said.
Similar kinds of “statistical noise” leads to drift in home-sale data tracked by other entities, Yun said. For example, data samples that rely on FHA, Fannie Mae, and Freddie Mac closings don’t capture all-cash transactions, which today comprise more than a third of home sales. Mortgage purchase applications, though a very useful metric for directional movement on a week-to-week basis, had a huge upward drift in the 1990s, which would have implied quadrupling of home sales during that decade. And data that relies on court house recordings could be showing a downward bias because of the lag in recordings of auction sales, short sales, and foreclosure sales, among other things.
In the video above, Yun talks about NAR’s EHS calculation methodology and the development of a new benchmarking procedure.
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Columbus Real Estate: Topic – Earnest Money – What is it and Why?
No Single topic seems to haunt the Columbus area home buyer more than Earnest Money. For good reasons too: 1) It’s usually a pretty large chunk of change and no one wants to give away free money, 2) At the same time, no one wants to buy a house they don’t want to buy-for whatever reason.
When combined, these two reasons make earnest money a potentially contentious issue. Home Buyers need to know as much as possible about the topic of earnest money to feel safe and secure during the real estate transaction. Sellers, too, need to know the ins-and outs of how they can be compensated by buyers who waste their time and keep their house off the active market.
Three big points regarding earnest money in Columbus Real Estate transactions. First, it is not a requirement in the State of Ohio for the buyer to put down earnest money. Second, that said, almost every residential real estate transaction in Central Ohio involves earnest money. Third, earnest money must be handled however it stated in the contract to be handled–whatever amount, in whoever’s account, to be distributed as laid out however the mutually agreed upon contract says it should.
Discussion: 1 Comment »
Why Columbus? From Mayor Coleman’s State of the City
Why Columbus? Really, why not…this video played before the state of the City address this week….
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Coming to a Columbus Neighborhood near you – $80 million?
Mayor Michael B. Coleman will talk about his priorities for the money on Tuesday and in his State of the City speech on Wednesday, said Dan Williamson, the mayor's spokesman. "He's very focused on neighborhood projects, things like streets," Williamson said.
“Columbus leaders will determine over the next two weeks how to spend about $80 million now available for street repairs, new vehicles, building improvements and other capital projects.
So far, they’re talking about adding air conditioning at recreation centers, increasing the number of neighborhoods that will get surveillance cameras and boosting programs to resurface streets and add sidewalks.
Three City Council members who are facing a primary election in May have been out this week talking about their proposals for spending the money.” Full story
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Reforming America’s Finance Market – The Obama Administration’s 3 Options for the future of Fannie Mae and Freddie Mac
It’s not just talk in Washington, the administration wants federal mortgage market reform and they want it now. Here are some excepts from the 28 page paper that came out this month. Take some time andread the whole thing here. It’s an easy read and I’d love to hear your thought. Here are some quick excepts…
“The housing finance system must be reformed. It is the vital link to sustainable homeownership
and rental options for millions of Americans, and it is central to our nation’s economy. We
allowed its flaws to go unchecked for too long, contributing to a financial collapse that has
strained families, decimated communities, and pushed the economy into the worst recession
since the Great Depression. The Obama Administration here provides a path of reform, which
will lead to a future system with more private capital, better-aligned incentives, more oversight,
and less risk to the taxpayer – in short, to a healthier, more stable system of housing finance.”
The Obama Administration’s reform plan is designed to:
1. Pave the way for a robust private mortgage market by reducing government support for housing finance and winding down Fannie Mae and Freddie Mac on a responsible timeline.
2. Address fundamental flaws in the mortgage market to protect borrowers, help ensure transparency for investors, and increase the role of private capital.
3. Target the government’s vital support for affordable housing in a more effective and transparent manner.
Option 1: Privatized system of housing finance with the government insurance role limited to FHA, USDA and Department of Veterans’ Affairs’ assistance for narrowly targeted groups of borrower.
This option would dramatically reduce the government’s role in insuring or guaranteeing mortgages, limiting it to FHA and other programs targeted to creditworthy lower- and moderateincome borrowers. While the government would continue to provide access for this targeted segment of borrowers, it would leave the vast majority of the mortgage market to the private sector.
Option 2: Privatized system of housing finance with assistance from FHA, USDA and Department of Veterans’ Affairs for narrowly targeted groups of borrowers and a guarantee mechanism to scale up during times of crisis.
As in the option above, FHA and other narrowly targeted programs would provide access to mortgage credit for low- and moderate-income borrowers, but the government’s overall role in the housing finance system would be dramatically reduced. In this option, however, the government would also develop a backstop mechanism to ensure access to credit during a housing crisis.
Option 3: Privatized system of housing finance with FHA, USDA and Department of Veterans’ Affairs assistance for low- and moderate-income borrowers and catastrophic reinsurance behind significant private capital.
Under this option, as in the previous options, the mortgage market outside of the FHA and other federal agency guarantee programs would be driven by private investment decisions with private capital taking the primary credit risk. However, to increase the liquidity in the mortgage market and access to mortgages for creditworthy Americans – as well as to ensure the government’s ability to respond to future crises – the government would offer reinsurance for the securities of a targeted range of mortgage.
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