The Philadelphia Inquirer reports this morning on the release of new data on home sales by the National Association of Realtors which shows the association has been overstating home sales since 2007.
- Alan J. Heavens, The Philadelphia Inquirer — National Realtors says it overstated home sales
"The National Association of Realtors said Wednesday that, since 2007, it had overstated sales of previously owned homes by about three million. Between 2007 and 2010, actual sales were 14.3 percent less than reported, the group said, while in 2010, there were 14.6 percent fewer sales."
For those interested, Calculated Risk does a nice job making sense out of the revisions. In the Inquirer story, an Econsult economist engaged in an unhealthy amount of revisionist history:
Why did the Realtors wait so long?
Philadelphia economist Kevin Gillen said an economic model such as this one is typically modified only if its 'performance has relatively degraded' compared with the way it worked previously.
'One of the primary reasons that so many models failed to predict not only the housing bubble, but the performance of the housing market after the bubble burst, is that such an event has never happened before,' Gillen said.
Forecast models are built from past data, he said, and 'the model will only work very well if the future looks a lot like the past.'
Economists like Dean Baker and Robert Shiller were making the case with data during the run up in the housing bubble that it was historically unusual for housing prices to rise substantially faster than the rate of inflation. So, in fact, housing prices were not behaving as they have behaved in the past. But as in all bubbles, a lot of people had a financial interest in pumping up the bubble whatever the cost. Here is a link to my favorite book on the housing bubble era, written by an economist at the National Association of Realtors.
Below is the trend in housing prices adjusted for inflation since 1990 in the US, Pennsylvania and Philadelphia Metro Area.