I wrote the the NAR’s public relations office regarding my concerns over their Q2 existing homes report, which the trade organization claimed showed price trends improving from earlier quarters — read my original post here, which outlines what appears to be a lack of analysis to support the claims. The NAR’s Walter Malony responded to my email, as per the below, although he noted that he is not an economist and that Lawrence Yun was too busy to respond himself. I’ll leave it to readers to determine what they think of the response, although I will say that none of it addressed the methodological concerns that were the focus of my original criticism. Here’s the response:
The fact is most metro areas are showing flat median prices – the lion’s share are either up or down modestly, and that’s been the pattern since the third quarter of 2006. Lawrence is still expecting the national median price to decline 1.2 percent this year, although some of that decline results from the geographic change in the composition of sales – something the mainstream media is ignoring. He expects the median existing-home price to rise 2.0 percent next year. It’s puzzling to me that most of the news clips we’ve seen on yesterday’s report focused on the drop of sales, which is nothing new. What is new is two consecutive quarters where more metro areas are showing price gains, and the national drop from year ago levels – although skewed – is narrowing (from a 2.7 percent drop in the fourth quarter of 2006). Most people are interested in what’s happening with home prices in their local area, but Lawrence’s encouragement that more metros are seeing increases played second fiddle to the gloomier headline on state sales. The constant drumbeat of accentuating the negative in the lion’s share of news coverage, sometimes without context, is, in fact, having a negative impact on home sales. Starting about a year ago, we began to hear complaints from members that buyers were backing out of contracts after reading gloomy headlines. It appears that this is becoming a self-fulfilling prophecy, and a recession is a distinct possibility. My background is in the news media. One of the things I have observed about a recession is that once it begins, advertizers pull back from media buys. The second thing that happens is managers are pressed to cut costs, and the first jobs that are eliminated are in the newsrooms. Has the media given any thought to that? In closing, let me offer some additional context on the various home price measures. All of them have their strengths and weaknesses, but the broad repeat sales indexes are showing modest national price increases – both from Freddie Mac and the Office of Federal Housing Enterprise Oversight. Although these indexes get some coverage, they are broadly ignored.
