Is the Housing Data Lying to You?

The answer, just like the answer to everything, is both “yes” and “no”. 

I received the weekly newsletter from our local MLS this morning and took note of their April housing numbers compared to mine. What I noticed were some slight deviations. So, let’s get into the details and explain what’s behind the numbers.

Received this morning from local MLS

The first stat says home sales were flat compared to the prior month. This is true. However, this should not be a number we look at. This is comparing “apples and oranges”. Housing is seasonal so we should be comparing numbers “year-over-year” (this April vs last April). Doing so would show that sales were actually down 6% in April. Furthermore, most consumers are more interested in existing home sales (not new construction), because they are interested in the possibility of selling their home. Factoring out new construction, April sales were down 11%. That’s a big difference compared to the headline, “sales were flat”.

Ironically the next stat shifts from a monthly comparison to a year-over-year  (yoy) comparison stating that the median sales price was up 6%. Again, this is a tad misleading because it includes new construction, which is more tied to construction costs than actual demand. Subtracting out new homes changes the increase to 4%. While not a tremendous change, it’s still less attractive than what was stated. 

To me, Total Housing Inventory is the most grossly misleading number. Total inventory includes homes under contract. They’ve basically already sold, they’re just working through the contingencies or waiting for closing. The more important statistic to follow is Active Inventory (homes on the market, not.yet sold). Consumers don’t care about what’s already under contract, they want to know how many homes they are going to be competing against if they put their home on the market and how many homes are NOT selling. Active inventory for April was up a whopping 42%, a far cry above 25%. This stat is crucial because it’s inventory that is controlling the market. It’s what controls how long it takes to sell a home and what the price will be. In fact, just since the market shifted in 2022, active inventory has almost TRIPLED, in three years.

The next bullet states that half the homes went under contract in 24 days. This is the

median days on market (DOM) and is also a very important number to track that predicts many things (supply, demand, and prices). The issue with this number is that it also includes new construction. This skews the data because most contractors list their new homes well before construction is completed yet most buyers won’t submit an offer on a new construction home until many of the finishes are installed, inflating the days on market. Factoring out new construction, existing homes sold in 23 days compared to 14 days a year ago. Again, this is a much larger percentage difference than 18 days.

I can’t say that there is any intention behind what appears to be “painting a rosier picture” than reality. Nor is this any different from what any other real estate organization does. However, it’s important for you to understand what these metrics mean and to be able to decipher the facts behind them, or to have a competent agent that can do that for you. Only by knowing the truth can you make the best decisions related to your largest asset(s).

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Looking forward to working with you when you decide to buy or sell.