Re-benchmarking of Existing Home Sales

December 21, 2011

What is Getting Revised?

No Revision to Median Home Price No Revision to Months Supply of Inventory
Local MLS data converted to months supply

Downward Revision to Home Sales Downward Revision to Inventory

Inventory = months supply * sales Inventory = (Inventory/Sales) * Sales

No Changes to Homeownership Rate No Changes to Local MLS data on Sales and Prices No Changes to Mortgage Default and Foreclosure No Changes to Underwater Status No Changes to Financial Statements of housing industry public companies.

Reported and Re-Benchmarked Annual Existing Home Sales

Reported Annual EHS 2007 2008 5,652,000 4,913,000 Re-Benchmarked EHS 5,040,000 4,110,000 Revision -11% -16%

2009
2010 4-year Average

5,156,000
4,908,000 5,157,000

4,340,000
4,190,000 4,420,000

-16%
-15% -14%

Annual Figures Old and New

8000 7000 6000 5000 4000 3000 2000 1000 0 old new

In thousand units

1,000,000 old new

2,000,000

3,000,000

4,000,000

5,000,000

7,000,000

6,000,000

0 2005 - Jan 2005 - May 2005 - Sep 2006 - Jan 2006 - May 2006 - Sep 2007 - Jan 2007 - May 2007 - Sep 2008 - Jan 2008 - May 2008 - Sep 2009 - Jan 2009 - May 2009 - Sep 2010 - Jan 2010 - May 2010 - Sep 2011 - Jan 2011 - May 2011 - Sep

Monthly Seasonally Adjusted Figures Old and New 8,000,000

Why Re-benchmark?
All data should undergo a third party data validity check
How many home sales if MLSs did not exist?

What Data were used in prior Benchmarking?

2000 data using Decennial Census Long Form data, which resulted in 13% downward revision to home sales back in 2000 2007-10 data using American Community Survey data resulted in 14% average downward revision

Why Revise from 2007?

Noted Variation Between MLS Sales and Property Deeds Data One Example Below by Fannie Mae Research

Reasons for MLS sales count and Benchmark Divergence?

Fewer FSBO home sales and more REALTOR-assisted home sales (e.g., no net increase in home sales in a case where 80 MLS sales and 20 FSBOs shifts to 90 MLS sales and 10 FSBOs) More Homebuilders seek REALTOR-assistance in listing properties on MLSs (More MLS count even though there is no increase in existing home sales) Flipping of a home (re-sell within 12 months) Re-benchmarked figure excludes the second sale, while they are counted as twice in MLS count Enlarged MLS geographic coverage Some of the home sales are not an increase in home sales but are just due to enlarged sampled areas Double counting as one single property is listed in two or more MLSs Example: a home in Colorado Springs is listed in MLS in Colorado Springs and is also listed in MLS in Denver.

Method of Home Purchase

Real estate agent
100 90 80 70 60 50 40 30 20 10 0
2005 2006 2007 2008 2009 2010 2011

Homebuilder

Directly from owner

What does revision mean for people?

Consumers are not impacted
Local MLS information matters for consumer decisions and there are no changes to MLS information

Real Estate Companies financial statements are same as before For-Sale-By-Owner home sales fell drastically during the housing market downturn as more sought REALTOR assistance GDP component from home sales will be lowered from 2007 to 2010 (Department of Commerce needs to do this) The home price elasticity from home sales is lowered (that is, it took an even bigger decline in home sales to bring about the observed home price changes)

Future Plans
MLS trend as the basis for Home Sales Trend will continue because it is most timely available data Re-Benchmark more frequently rather than waiting for data drift to accumulate over time
Annual re-benchmarking and supplement using Courthouse Data

2 years of Census time-series data are needed to get one full year of benchmark.
2007, 2008, 2009 benchmarked figures are complete 2010 will be revised again next year

Realtor Property Resource (RPR)

Utilizing detailed property level data of both deeds records and MLS information as potential future source

Exploring the Development of Repeat-Price Index using Timely MLS data

The median price of sold homes is influenced by type of homes sold during the period and may not be a reflection of a general home price change

Other Data Issues

MBA mortgage purchase applications
Very useful gauge weekly, but huge swings and drift over long haul No information on approvals

Census new home sales

Not closings but contracts How many closings? Fallout rate? Are housing starts a better reflection of the new home market?

HMDA data on mortgage approvals

HMDA has no information on all-cash deals

< NAR Existing 1-Family Home Sales, United States

SAAR , U nits

MBA: Volume Index: Mor tgage Loan Applications for Pur chase >
SA, Mar -16-90= 100 6750000 600

6000000

500

5250000

400

4500000

300

3750000

200

3000000

100

2250000 90 Sour ces: 95 R EALTOR , MBA /H aver 00 05 10

12/ 11/ 11

Note the figures in % changes going up from 1990 to 2005 - mortgage purchase app up 400% - single-family EHS up 100% - single-family NHS up 200%

HMDA share of Home Sales

(Existing and new home sales, not housing starts)
80% 70% 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 2010 pre-EHS revised-EHS