By AnnaMaria Andriotis
So much for a housing recovery. A report by the National Association of Realtors this morning showing that existing home sales over the past four years were actually worse than previously reported could be yet another setback for home sellers.
Revised sales figures show that the actual annual sales of existing homes were 11% to 16% lower for every year from 2007 through 2010. Roughly 4.2 million existing homes sold last year, compared to around 4.9 million that was previously reported. Sales are roughly 20% below 2007 levels rather than 15% below that the earlier data claimed. Based on the re-benchmarked data, annual sales are trending around 1996 levels.
These lower sales numbers could have implications for home buyers and sellers, say analysts: there’s now even less urgency to purchase a home, and that could further impact home values going forward, experts say. “It’s an eye opener to a lot of people who’ve been quoting realtor data as the gospel,” says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla.
Experts say the most critical data for the housing market right now is the most recent revision for 2010, which shows a 15% drop in sales. That number could impact buyer psychology, housing analysts say. If fewer people are buying, there’s less of a need to purchase for fear of losing out on a deal. Since sales haven’t been as strong as realtors said they were, the downward revision should mean less urgency to buy, says McCabe. And it could signal to buyers that they still have time to wait since the market is down and could have more room to fall, says Stuart Gabriel, director of the Ziman Center for Real Estate at the University of California, Los Angeles.
Sellers, on the other hand, could see less demand from buyers. The result could be sellers coming to grips with the new reality that a full recovery is further off than previously expected. And those who are eager to sell could be willing to negotiate to a lower price, says Gabriel.
For homeowners who are planning to stay put for a while the revisions could be a nonissue. It’s possible though that a slower sales pace could lead to more downward pressure on prices, says McCabe, which could impact home values. That remains to be seen. Also in today’s NAR existing-home sales report were sales figures that increased 4% in November compared to October and 12.2% compared to November 2010. Experts say that might suggest the worst of the housing market downturn has passed.
The revisions to annual data were due to several factors including properties that were added to the Multiple Listing Service (where realtors list properties for sale) in more than one city or town; when a property sold, it was registered as two sales when it was actually one home. In addition, as metro areas grew and real estate sold in outlier regions were added to the MLS, sales there resulted in reports of growth in home sales rather than being adjusted to reflect that the area wasn’t included in previous reports. In addition, a bulk of the revisions came from a decline in for-sale-by-owner transactions.
To be sure, Gabriel says this new data might not be a big game changer since the NAR’s data is just one of several benchmarks that track the housing market. And for its part, the National Association of Realtors says home sellers and buyers shouldn’t be impacted by these changes since the revised data is national while real estate trends are local. It also points out that previously it revised its data approximately every 10 years, but will revise every year going forward.
Still, experts say the revisions come at a sensitive time for the housing market. McCabe says the foreclosure and short sale crisis might only be half way over and that coupled with the eurozone crisis it could contribute to additional home value declines next year. “These are not positive drivers for the housing market,” he says.