Jonathan Miller takes on housing market reports

The expert real estate appraiser says it’s a mistake to take data at face value

New York /
Aug.August 02, 2014 02:00 PM

 All too often consumers rely on monthly reports to get a sense of the U.S. housing market, when in fact the very nature of the real estate market hobbles those reports, according to real estate appraiser Jonathan Miller.

“Buying or selling a house is a slow, lumbering, inefficient process that takes months to complete. There is a significant lag time from a meeting of the minds between a buyer and a seller to when the sale gets reported to the public. Yet we hang on each report and the bold headlines they inspire without proper context or understanding,” Miller writes in Bloomberg News.

For instance, last Tuesday’s S&P/Case Shiller report seemed to suggest some slowing in the market, with only a 9.3 percent rise in existing housing prices in May.

However, Miller writes: “This edition of the S&P/Case Shiller report, although labeled “May,” is the moving average of completed sales from March through May. If we assume their respective sales contracts were signed 60 days before closing, the report reflects the market period from January through March. And because it often takes several weeks from the time a buyer and a seller agree to terms and sign a contract, 30 to 60 more days might pass. This means the index probably reflects deals reached in the period from December through February.”

And Monday’s Pending Home Sale Index, or PHSI, released by the National Association of Realtors, isn’t much better, according to Miller.

“The NAR is an industry trade group and dependable cheerleader for the residential housing market. In spite of this, its index has a 30-day lag time, the shortest of the various real-estate market reports. It also has the advantage of reporting the number of contracts signed on existing homes, as opposed to prices,” he wrote.

According to Miller, data does a fine job of explaining the past, but a poor job of predicting the future.  [Bloomberg News] Christopher Cameron


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