NAR’s Existing Home Inventory Number is Wrong

October 22, 2013

by Mike Simonsen

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Here’s a surprise for you, the National Association of Realtors doesn’t know how many homes are for sale. Yesterday’s existing home sales announcement included NAR’s estimate that there are 2.2 million homes for sale. Our data shows that it’s overstated by a third.

There are actually approximately 1.7 million homes on the market (active inventory) right now.

Existing Home Inventory Altos Research tracks homes for sale in the 900 most populous counties (colored blue above) around the US.

 

NAR doesn’t disclose precisely the methodology they use, but their data is sourced from participating MLS organizations. NAR’s estimates are influenced by the reporting structure in those member associations. Incidentally, Realtor.com claims to have 4.7 million homes for sale, but that’s clearly a meaningless marketing number (more is better, right?) It includes duplicates, empty land, and other flotsam. Disregard that number.

The truth is that all these numbers are estimates. The best way to know for sure is to count them all.

When we count our data, and adjust for those counties, the total is closer to 1.7 million. (Altos Research covers 90 million residential homes in all 50 states. It’s not *everything* but the rest is very rural, so it’s really useful, see map.)

Why are they over estimating? No, it’s not because the scoundrels are trying to trick you. My guess is that some of these estimates include properties that already have offers. The number properties in “pending” state can be as high as 100% of the active inventory in many markets this year. As listings get offers quickly, then take a month or more before the transaction closes, these properties sit in pending state. The hottest markets this is most true, for example Las Vegas and San Diego have had screaming demand and price appreciation this year. They have huge stocks of properties “pending”. Different regions give different labels to the condition, but the result is the same. The sale hasn’t “closed” so the listing is technically active. But the property really isn’t for sale any more.  Is that active inventory? Our take is that these are not active. If you’re shopping for a home in that market, your Realtor isn’t going to show you a house that is already in some stage of contract with another buyer.

The lesson, as always, is read the headlines with a critical eye. Also, give us a buzz if you want the full scoop on the active housing inventory every week.

 

 

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