The overstatement of existing home sales by the National Association of Realtors, NAR, may have caused a setback to the speed of a housing recovery.
Errors that began in 2007 and accumulated through the housing bust mean that home sales were actually 14.3 percent worse than reported by the NAR. Builders rely on the data to help them determine future development projects, while legislators and economists use the numbers to gauge the overall health of the market.
In reporting the errors, the NAR now says there were 5.04 million existing home sales in 2007, 11 percent less than the organization originally reported. The data flaws snowballed from there: In 2008 and 2009, sales were 16 percent less than reported, and in 2010 they were 15 percent less.
Mark Zandi of Moody's Analytics said on CNNMoney that though the sales figures are important at the time they're released, the revisions won't mean much at this point. "We all knew it was a crash, now it's a deeper one," he said.
But even if the flawed data don't affect what's happened in the past, it could mean that home prices will drop further than expected next year. That's because distressed properties (what the industry calls "shadow inventory") make up a larger share of the market with the revised sales figures, according to CNBC.
Since banks are eager to unload distressed properties (those in foreclosure or on the brink of foreclosure) at fire-sale prices, it puts downward pressure on nondistressed home prices. Just last week, CoreLogic reported that when distressed properties are removed from home sales data, prices of nondistressed homes were beginning to stabilize, indicating a trend toward housing recovery. The revised NAR data could have just thrown up a caution sign.
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