Most housing reports and forecasts are garbage. But we grasp for this jetsam and flotsam; ears going up when “housing reports” are mentioned or when Case-Shiller tells us what to think about housing prices. Well it’s largely nonsense; reports or findings are routinely published only to be “revised” a few weeks later. The problem is that many opinions are based upon skewed data, prepared to “support” a point of view or simply improperly prepared and interpreted.

Lani Rosales of The American Genius touches on the issue:

Here are just three examples of faulty stats:

ILikeHousesAndPizzaAndCats.com (a site I just made up) reports today that their data shows housing in a downward spiral, with foreclosures up 12 percent, sales down 80 percent and housing starts remaining stagnant. Scary, right? The problem is that it’s flat out wrong, but some talking heads don’t vet their information, they just see the word “report,” and opine that the sky is falling.

Most housing reports are useless; either too broad or too narrow. The unique nature of real estate does not mesh with a “one size fits all” approach found in most industry reports.

SomeNationalHousingSite.com (another site I just made up) reports that housing is improving, as home prices are up 35 percent from 2012. Unlike the first example, the information isn’t wrong, it’s just extremely limited, as most real estate search sites are reporting the home prices of houses for sale on their site. The data is not wrong, it’s just incomplete, and let’s face it, most people don’t read the methodology portion of reports to understand just how limited this data is (especially true for the very small search sites that offer data reports as economic indicators).

SomeUniversityThatLikesHousing.com (obviously, another made up name) reports that consumer sentiment is up 12 percent over last month, and home buyers are feeling super happy about the market and are ready to jump in. It’s not false data, but if you read the methodology, it is often a web survey placed on the University (or search portal’s) site and is based on 250 responses. The data is not wrong, but the data set is too limited to consider scientific.

The same can be said for studies based upon too much data. We have been and continue to be staunchly opposed to reports like Case-Shiller being used for anything more than the very broadest market opinions. For years we’ve pondered just how accurate they are with their definitions of “city”. They consider “Atlanta” to be Atlanta-Sandy Springs-Marietta; other organizations including several local ones consider “Atlanta” to be 20+ counties. Like the three bears, we need to find the sweet spot that reflects the micro market under consideration.

Data accuracy isn’t just for the hobbyists – if you have a home on the market or are hunting, you want to make damn sure that the price is fair. You want to know the accurate average days on market for your subdivision, not just some projected number some stranger pulled out of their you-know-what.

Listing data accuracy has been a huge tangled mess in the real estate industry, as listing syndication took off without the proper groundwork being laid (no one could have predicted this Jetsons-like future). Organizations like NAR have been devoted to untangling the mess through data standards and policies, but when any Joe Jack Bob can start a website, invite brokers post their listings there for free, call it a national search site, and tell CNN that housing is falling apart based on their data (and for whatever reason CNN runs with it), consumer sentiment is improperly swayed. See article

Readers of this blog along with our past and present clients know our affinity for accurate data, it is the foundation for everything we do. There are no one size fits all answers, real estate is unique and that mandates actual work to accurately understand the market. Altos Research and Market Trends provide hyper local market conditions updated weekly and quarterly. Most often, appraisal level research is required to really understand the trends and this is what our clients get.

So next time you hear that the real estate market has turned the corner or that we’re back in the slump, take it with a grain of salt. Understand the shortcomings likely in the “research” and keep things in perspective.