Headline: January Existing Home Sales Is Revised Higher

Source: Reuters, 7 Mar 2001 [via NY Times online]

URL: http://www.nytimes.com/reuters/business/07wire-homes.html

WASHINGTON -- The National Association of Realtors Wednesday revised U.S. January existing home sales data sharply higher, saying sales rose 3.8 percent in the month to a 5.13 million unit annual rate.

The realtors' group originally said sales of previously owned homes fell 6.6 percent in January to a 4.65 million unit rate.

"When upgrading to new software in May 2000, a software vendor failed to update data covering the first four months of 2000," NAR said in a statement on its Web site.

"Monthly sales rates and inventory levels are affected most by the error; there are no revisions to price data," the group said, adding that "although most revisions are minor" the error resulted in under-reporting of sales rates for the first two months of 2000 as well as January 2001.

NAR said December existing home sales were revised to 4.94 million units from 4.98 and January 2000 sales to 5.03 million from 4.54 million.

The group said it discovered the error this month.

-- Andre Weltman (aweltman@state.pa.us), March 07, 2001

Answers

Consumers lose confidence when home sales drop. It occurred to me how easy it is to come back and tell the world there was a computer error and sales figures have now been revised. There are some real indicators that all is not well when you look locally.

-- JP Thomas (y2kids@y2kids.net), March 08, 2001.

Note reference to Y2K!!! This error was as much a "Y2K error" as if it were due to the direct subtraction of two dates...the pressure to fix software at the "last minute" led to lots of problems.

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Headline: Bad News On Home Resales Was Wrong

Source: By Daniela Deane, Washington Post Staff Writer, Thursday, March 8, 2001; Page E01

When the National Association of Realtors released statistics last week showing that home resales had fallen off sharply in January, it looked like one more indicator of deepening economic gloom.

It wasn't.

Yesterday, the D.C.-based association said that home resales were actually up; the earlier report was a result of bad numbers, not a bad economy.

Resales rose 3.8 percent in January over the month before instead of falling 6.6 percent, according to the association. "Human error" in data entry caused the discrepancy, which will force the association to revise up to three years of data, according to spokesman Walter Molony.

"Blame it on Y2K," Molony said. "We needed to implement new software, so we had this done for us by an outsider."

The erroneous numbers last week surprised economists and prompted some to worry that one of the previously strongest sectors of the nation's economy had started to deteriorate.

"There was a lot more talk of recession when those existing-home sale numbers came out," said Orawin Velz, senior economist at secondary mortgage giant Fannie Mae. "Anyone who was afraid, and using housing data as evidence of a higher risk of recession, needs to reevaluate that view now."

Velz described the nation's housing market as still in good shape.

"Those numbers gave the impression that the economy was worse than it was, that consumers were retrenching when in fact they were not," said Sung Won Sohn, chief economist at Wells Fargo & Co., the country's largest home-mortgage lender.

Sohn said faulty numbers can lead to a ripple effect through various sectors of the economy.

"If I were a home builder, for example, I would have been more careful about starting any new projects when I saw that number," Sohn said. "If I am Home Depot supplying materials, I would be worried about ordering more inventory based on declining home sales."

He said homeowners around the country who were ready to sell their houses may have also put a lower price tag on their homes, thinking sales were off.

"This upward revision makes a lot more sense when compared to the jobs figures," Sohn said.

The NAR's Molony said three months of numbers -- this January and January and February of 2000 -- were substantially different from the real number. He said other, smaller revisions will also have to be made, including to the sales figures from 10 months of last year.

"We reported that sales were down when in fact they were up," Molony said. "It couldn't have happened at a worse time."

The revised data now show sales of previously owned homes at an annual rate of 5.13 million in January, up from a revised 4.94 million in December. That's up 2.4 percent over January 2000.

Last week, the NAR erroneously reported sales of 4.65 million homes, down from December sales of 4.98 million and up 2 percent from January 2000.

David Lereah, chief economist for the Realtors, issued a statement yesterday saying: "It is now clear that the housing sector continues to stand tall while other sectors of the economy continue to exhibit sluggishness."

He said, "This revision should serve as a message that all major housing measures have consistently outperformed other sectors of the economy." Lereah, who last week used the soft resale numbers to call on the Federal Reserve to further cut interest rates, repeated that call yesterday, saying the Fed still needed to act to keep the housing sector healthy.

"Given the sector's dependency on interest rates, further rate cuts by the Federal Reserve should help support a healthy housing market in the future," Lereah's statement said.

David Seiders, chief economist at the National Association of Home Builders, said he doubted that many builders had changed course because of last week's faulty numbers.

"I doubt it had that big of an effect," Seiders said. "We discourage abrupt changes of behavior with any one-month change."

An embarrassed NAR apologized for the numbers error in the statement, saying "data integrity is paramount."

"Although the error resulted from an unusual confluence of events, procedures to ensure it can never recur have already been implemented," the association said.

-- Andre Weltman (aweltman@state.pa.us), March 09, 2001.