"Revisions" are Always "Downward."
The US housing market has been pretty bad for the past few years, but now we discover it's actually been a lot worse.
The National Association of Realtors -- a trade group created to promote the housing industry -- has suddenly discovered that the methodology it used to calculate the national home sales statistic, which has been a key indicator for years -- was wrong.
And not just wrong, but wrong by about 14%.
And not just wrong by 14%, but wrong by consistently overstating the number of houses sold in the United States since 2007.
This means that they overreported during a bubble, making the bubble worse. Because, they say, they double-counted some properties, or misidentified MLS listings. All fixed now, they say. We can carry on as usual, with the knowledge that the housing market is about 14% worse than we thought it was.
The problem here, of course, is that these stats are used -- and have been used -- to make economic policy. By delivering bad information -- and bad information that curiously helped propel the housing industry's growth, by masking the real estate downturn until it was too late -- the NAR has joined a long list of organizations that can't be trusted to deliver non-partial data.
When the unemployment numbers are "revised," they're always revised downwards. When the quarterly GDP numbers are revised, it's always bad news.
Is it any wonder that voters think the game is rigged? With them as the ultimate "mark?"
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Comments :
Jun '10
Re: "Revisions" are Always "Downward."
Precisely how does an organization like the NAR screw up their data gathering this badly? Don't they audit it occasionally? How do you record a non-sale as a sale?
One would think that this data, probably the most important the NAR gathers, would be correct.
Embarrassing.
Perhaps we could create "Long's Law": "All economic data will be revised later to produce a worse number?" This covers the situation where revising a number upward is bad (e.g. unemployment).
Edited on Dec 22, 2011 at 12:11pmJul '10
Re: "Revisions" are Always "Downward."
Just for the record, I bought ONE and only one house this month.
Jul '10
Re: "Revisions" are Always "Downward."
Correction: revisions are always downward unless they are unemployment numbers, in which case the revision is always upward.
May '10
Re: "Revisions" are Always "Downward."
Congrats.
Jul '10
Re: "Revisions" are Always "Downward."
I vaguely recall a period when it seemed like things were constantly being revised up, it was late in the first Reagan administration to early in the second, it seemed unemployment wasn't as bad as everyone said during the election, things were mysteriously better. I have been told I mis-remember that, I suppose that is true, but I still feel that after Carter left that unemployment went down, eventually, and interest rates went down. Back before that election I had studied economics, Keynesian economics, at the University of Maryland. We were taught that institutional unemployment could never go below 5 per cent. Then it did. During W's administration I used to note the impossibly low unemployment. I had a friend with a 13 per cent mortgage, my current mortgage is 4.62 per cent. Inflation also dropped between Carter's leaving and Reagan's leaving. Apparently all we need is some Voo-Doo Economics, like the kind I laughed at the first time I voted, for the wrong candidate, Jimmy Carter.
Dec '10
Re: "Revisions" are Always "Downward."
Rob, I think this is all not surprising. From the point of view of pure economics Real Estate is one of the hardest things to analyze. You can't manufacture Real Estate in one place and ship and sell it throughout the world. Not only is it not portable it is extremely local in it's market effects. That's why it's location, location, location.
What happened in the melt down was really quite simple. The great truths of mortgage policy handed down in their current form from the Great Deression were ignored by the naive or intentionally broken by the corrupt.
Put 20% down and qualify for a good rate and you get a mortgage on a property. Pushing the envelope was to take a mortgage with less then 20% down and be forced to pay special mortgage insurance..etc. Interesting that the law forcing the disclosure of actual defacto interest rates was not 'triggered' by the phrase "no money down" in advertising. Just this alone would have put the idea back into people's heads that less then 20% down was not a good thing.
Whoever does not learn from the past is bound to repeat it.