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If you are buying or selling a home, chances are you follow real estate market news carefully. As you scan the headlines on your computer, you’ve probably noticed that they frequently contradict themselves.
How can home prices be up one day and down the next? When one report says houses are selling faster than ever and another says to be prepared to wait months after you list your home for sale, what should you believe?
Like making laws or sausages, creating real estate reports can be a messy process not meant for public viewing. Today, there are at least 15 national real estate market reports issued every month—and none of them are conducted in exactly the same way.
Some reports come out within days of the time period they cover, while others report data and trends that are as much as three months old when the report is released. Some cover 200 or more markets, others as few as 20. Some reports use information from real estate listings and courthouse records, while others use survey results or actual numbers from multiple listing services.
It’s no wonder reports differ so much. In fact, it’s remarkable they agree to the extent that they do. The differences in how reports are generated make it a little complicated to compare them.
Making sense out of real estate market news requires a basic understanding of what information different reports cover, what periods they cover, and how they are compiled. Here are five clues that will help you better understand the real estate market reports covered in the news.
Look at the time period. Some reports, especially those based on public data from courthouses or on appraisal data, can be three months old—or even older. For example, reports from Case-Shiller, FNC, and the government’s Federal Housing Finance Agency all come out months after the time periods they cover.
On the other hand, reports based on listings in multiple listing services like Realtor.com and Trulia come out just a week or two after the close of the month they cover. While it may seem as though one report is contradicting another, it may be that they are simply reporting on different time periods.
Consider the sources. Reports use different sources and types of data, and there are advantages and disadvantages associated with each kind of data that can affect the quality and accuracy of the reports. For example, listing data is very timely but only covers properties listed on multiple listing services, and those services don’t list homes sold by owners nor many new construction homes or foreclosures that are not yet REOs.
Aside from those exceptions, listings are great representations of inventories but not necessarily prices. This is because listing prices can vary significantly (generally around 5 percent) from the prices at which properties are sold. However, prices for new listings are valuable as a forward look at a market because they will set the bar for several months to come.
Sale prices from public sources and from appraisal data are more accurate but also less timely. The most accurate reports are based on repeat sales indices that include data for individual houses and track changes in sales prices over time.
Finally, reports sometimes utilize surveys of real estate professionals or consumers—and these are least accurate.
Locate the geography. No doubt you’ve heard that all real estate is local. Yet it is quite possible that the real estate report you heard on the radio included no data at all from your local market.
Very few national reports get their information from even 100 of the 917 Core Based Statistical Areas (CBSAs) in the U.S. Some, as noted above, have as few as 20, so the chances are fairly good that your market is not represented.
Does this mean a national report that doesn’t include your market is useless to you? Not entirely. Some of the trends discussed may exist in your market as well, but take what you read with a grain of salt.
Identify trends. When one report comes out with findings that support another report you have read, take note. In real estate, trends cross borders, and they either grow or subside with time. When reports start to confirm each other, you may be watching the birth of a trend that could affect your market, if it hasn’t already.
Recent trends that fit this description include inventory shortages, rapidly rising prices, shorter market times, and fewer foreclosures for sale.
Beware of hype. The sponsors of market reports include websites seeking your attention and research companies building their reputations in order to market to potential subscribers. These sponsors seek news coverage by emphasizing unique findings or promoting the accuracy of their information, and you should bear this in mind when you read their reports.
So the next time you’re stuck in traffic and the radio has a news story about home prices, don’t get too excited until you can do your homework. Chances are, once you’ve done a little research, you’ll find that the news may not be quite as big a deal as it first seemed.
Steve Cook is executive vice president of Reecon Advisors and covers government and industry news for the Reecon Advisory Report. He is a member of the National Press Club, the Public Relations Society of America, and the National Association of Real Estate Editors, where he served as second vice president. Twice he has been named one of the 100 most influential people in real estate. In addition to serving as managing editor of the Report, Cook provides public relations consulting services to real estate companies, financial services companies, and trade associations, including some of the leading companies in online residential real estate.
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