There are lies, damn lies, and statistics, said Mark Twain.
According to a news release from Corzen Real Estate Indicators , online housing listing inventory was 2.3 million in May 2006, up from 1.3 million in May, 2005, up 60 percent -- a figure the National Association of Realtors disputes.
Corzen's monthly survey is based on a zip code-by-zip code analysis of homes listed online at Realtor.com , says the company. "On a monthly basis, Corzen gathers data on every home listed for sale, including the location, the asking price, the number of bedrooms and bathrooms and the listing broker or agent. Corzen consolidates this data and reports on detailed real estate industry market trends across the country and for specific metropolitan areas," says the release.
According to its methodologies , Corzen measured data on 1.3 million homes in 100 of the largest markets for the report. Out of 1,655 counties in the dataset, 1,000 are in MSAs. The problem is -- that doesn't measure apples to apples, says the NAR.
"You may have some skewing," explains Walt Molony, senior research associate of the NAR. "If you have a slowing of activity in the largest MSAs and increasing activity in smaller markets, you aren't comparing apples to apples."
According to Corzen's sampling, 1.3 million listings in May 2005 rose over 60 percent to 2.3 million in May 2006 on Realtor.com in the same 100 markets. Corzen estimates the asking prices for 3.4 million homes.
Listing inventory statistics aren't available from either Realtor.com or the NAR, but they are available for April which is close in number to May. According to Bob Goldberg, board member of Realtor.com, in April 2006, there was an increase of listings over the previous year -- 3,293,663 in 2006 over 2,746,787 in 2005. Raw listing inventory data from the NAR research department confirms 2.47 million in April 2005 and 3.38 million homes in April 2006. That's a 36.7 percent year-over-year increase on the whole nation -- not a sampling of select 100 markets.
Adds Molony, "The days on market are ticking up in the most expensive markets, and that could skew the results."
Corzen, like many other analysts, is attempting to make understanding markets like real estate easier for its clients, the company says, by tracking "external market conditions that affect important categories of revenue and expenses."
"The company focuses on marketplaces that are undergoing fundamental changes and lack a source of relevant, timely information about market conditions. Using the Indicators service, our clients are able to develop superior insight into the direction and strength of specific market forces. This enables them to make better, more-timely decisions to increase profitability," it says.
Is this a real service or is the company creating the sky-is-falling buzz among housing-hungry media and clients?
Says Steve Cook, spokesperson for the NAR, "Increases of one million listings in 100 metros is significant, but by our numbers it doesn't compute with the information on inventories we collect every month on existing home sales nationwide."
Adds Molony, "There are some markets that could have a 100 percent increase, but what does that mean? Some areas are heating up and others are cooling down. We saw a story in the Washington Post last year that said inventories were up significantly, but what the numbers meant were that inventories went from a one-month supply to a one and half-month's supply. Even if the inventories were at 100 percent, you still have a seller's market.
"This is the first balanced market we've seen in years," says Molony. "It's been a seller's market and inventories are at 6 months now."
"We do see significant decline in asking prices in certain counties, where the volume of available properties online has increased as much 400 percent," said Charles Thibault, Corzen market analyst. "However, 75 percent of the counties in Corzen's sample showed no change or increases in prices, suggesting that asking prices in overall market are not in a downward cycle -- yet."
Sounds ominous. Is the sky falling? Or can any statistic be made to look better or worse if it serves a purpose?
"Inventories are probably up in May," responds Molony, "We've had 4 to 5 years of a sellers' market, and now we have one month of a balanced market. Trending toward 7 months of listings on hand or higher would be a buyer's market or a very slow balanced market. Last time we saw a clear buyer's market was 1990 and 1991 when we had over 9 months' supply of housing inventory on hand, and we aren't anywhere close to that. Builders are throttling back. They got caught with an oversupply then, so they are more hesitant now.
"We show inventories up 5.9 percent from March to April, and we are projecting a plateau in the market, but we're looking for return for normalization and that has taken pressure off prices, but the fundamentals are normal."
He concedes, "We've never seen appreciation cool so rapidly year-to-year, from 12.5 percent to 5.3 which is what we project for housing appreciation for 2006. That's a dramatic decline but that's still above the high of historic norms. Historically, housing beats inflation by 1.8 points. If inflation is held to 3.1 percent this year, housing will beat inflation by 2.2 points."
It is the supply figures that are the most relevant, says Molony. "We are at a 6-month supply which is balanced, and that is one figure we will be watching closely."
