Whoops, home sales are worse than we thought

Posted by Al Lewis on December 14, 2011
Economy

If you think the economy is worse than the conditions being reported, here’s another example of why you may be right.

The National Association of Realtors now concedes far fewer homes have been sold over the past five years than it had estimated. Click here to read more on that.

This is why they call economics the dismal science. It’s a set of assumptions based on a set of assumptions. And the bias is often to the upside.

The nation’s gross domestic product is yet another example of data that is revised downward after its initially released. When that happens, it means the whole economy is worse than initially reported.

Since it was the housing market that tipped the U.S. into this abyss, it would seem having the most accurate data on home sales would be a paramount indicator as to the recovery. But when you read about homes being counted twice, as you can in the linked story above, I suppose all an economist can say is, “Whoops!”

2 Comments to Whoops, home sales are worse than we thought

Donald Missey
December 14, 2011

Hi Al, several factors stymie this effort at developing economic metrics. You put your finger on one with the poor quality of the GDP as a significant economic indicator, and the faulty data set used to develop GDP. Further, if industries are never going to recover, because the entire culture and economy is moving away from, lets say, single family homes owned by occupants, to multifamily apartments and condos, then no amount of recovery tracking will demonstrate the phenomenon correctly.

To use a more concise example, if a decline in buggy sales coincided with the rise of the model T, you would be making a serious error in recovery analysis if you continued to track buggies to find evidence of a recovery.

Frankly, we are still tracking buggies.

Mark
December 16, 2011

Why would anyone trust reports from NAR? They have an incentive to state that “everything is coming up roses” because they want the public to play “Keep up with the Jones” and if you don’t buy property, you’ll miss out on a dream home! Heaven forbid. Its like listening to a stock broker who will always tell you to buy. Potential buyers need to realize that home ownership comes with risk & responsibility. Don’t get into it if you want mobility & flexibility in your life. Keeping a job may require moving & a property may prevent you from moving on to greener pastures.

Only part of the general public is responsible enough and in the financial position to own property. Its time the financial markets, banks, governments, & most importantly, the public realize that fact. The public needs to wake up to the fact the people they elect to represent them are using the promise of a “dream home” to buy their vote. The end result being that they get elected & you could be stuck with a mortgage you can’t afford, plus a busted credit history. Caveat Emptor.