Real Estate “Top Ten” Lists

Introduction.  When the credit industry collapsed circa 3Q 2008, followed by the real estate and construction industries, some journalists apparently became tired of reporting the same dire news everyday. They tried hard to put a happy face on their stories, so instead of using headlines of gloom and doom, they would breathlessly announce that the huge drop in housing starts, for example, was not as bad as the prior year.  And in an effort to vary their readers’ diet of real estate news, we have recently been seeing the appearance of Top Ten Lists, which report “rankings” rather than the statistics supporting them.  Not only does this “dumb down” the real news, but it give journalists the ability to create their own little beauty contests, and then report on them as if it is “hard news.”  So rather than publish raw numbers and their sources, these “lists” are ostensibly based upon either third party reports [which lawyers object to as “hearsay”], or nothing at all [which we object to  as “lacking any foundation.”].  – PCQ

The Portland Business Journal recently reported that according to ZipRealty, the “… Emeryville, Calif.-based real estate brokerage, ranked Portland among the Top 10 cities in the U.S. for home sellers based on the ratio between the listing price and the final price paid and for the amount of time it takes to sell a home.”

Here’s a snippet of the February 14, 2013 article: titled “Happy Valentine’s Day, home owners!”

Portland ranked ninth (ahead of No. 10 Seattle) with buyers paying an average of 98.9 percent of the original asking price to close a deal.


Portland ranked eight on a separate measure based on the amount of time it took to sell a house. The average Portland home sold in 40 days in 2012, a third faster than in 2011.”

But wait!  Does “98.9 percent of the original asking price” apply just to equity sales [i.e. where the seller has equity, vs. short sales where sellers bring no money to the closing table], or all sales? What about REO [i.e. bank owned] sales? The average Portland home sold in just 40 days in 2012?  Really!  Where did that number come from? What is it based on?  Does that mean if I put my home on the market today, it will be “sold” in a little over a month? And what does “sold” mean?  Is it sales under contract – meaning the seller and buyer have inked the deal, or does it mean that the transaction actually closed in escrow, i.e. money changed hands, title transferred, and the deed was recorded?  The fact that one must ask such basic questions, casts doubt on the reliability of the report and the reporter.

This is the kind of data – and reporting on data – that drives me nuts.  Unsubstantiated blather – the journalistic equivalent of Hamburger Helper, used to fill newspapers.  We have been plagued with this stuff for the past five years.[1]  Every wag and rag in the country offers up real estate “news” with no vetting, verifying, or sourcing.  Where did ZipRealty come up with these figures? How are they compiled? How large is the sample?  What methodology was used?  And by the way, where the heck is Emeryville, California?  Is that where emery boards are made?  Besides being a small dot on Triple A’s northern California Trip Tik®, is there anything about this town we need to know? And what is ZipRealty, anyway?

Coincidentally, on February 15, 2013, one day after the Biz Journal report, our local Regional Multiple Listing Service, or “RMLS™”, published its monthly statistics through January, 2013.[2]  Here is a part of their report:

“The average sale price in January was $287,700, and the median sale price was $248,000. Prices are rising over time. Comparing the average price of homes in the twelve months ending January 31st of this year ($277,000) with the average price of homes sold in the twelve months ending January 2012 ($262,900) shows an increase of 5.4%. In the same comparison, the median has increased 7.3% to $236,000 in the last twelve months from $219,900 in the preceding twelve months.”

The RMLS™ methodology is explained in its report: % change is based on a comparison of the rolling average sale price for the last 12 months (2/1/12-1/31/13) with 12 months before (2/1/11-1/31/12).”

And we know where RMLS™ gets its statistics – from the sales of all property listings in the Portland-Metro area.[3]  Significantly, RMLS™ reported that total market time through January 2013 was 114 days. Its methodology is also explained:  Total Market Time is the number of days from when a property is listed to when an offer is accepted on that same property. If a property is re-listed within 31 days, Total Market Time continues to accrue; however, it does not include the time that it was off the market.”   [Underscore mine. – PCQ]

Now that’s news you can use!  Why? Because RMLS™ is in the business of keeping these statistics for its Realtor® members.[4]  Its methodology is explained, and importantly, it is not putting out the information merely to see its name in print.  ZipRealty, out of Emeryville CA, is a real estate brokerage whose business [besides listing and selling residential properties] – apparently includes compiling meaningless statistics for gullible reporters to gobble up without question, and then regurgitate to the public under the guise of “News.”  A Top Ten List, regardless of validity or accuracy, is surely to be picked up and passed along – at least by the ten cities identified. [I suspect this list was actually developed by giving ten monkeys ten darts, a board with the names of large American cities, and a half-hour’s playtime after lunch.- PCQ]

What can we draw from the Business Journal’s report?  If “time on the market” means “Total Market Time,” i.e. from the day of the listing to the day of seller-buyer agreement, RMLS™ says that figure was 114 days for the 12 months through January, 2013. But since we know that if it takes over 3 ½ months to get the offer accepted, it must take longer to get it closed.  If so, then what can it mean to say – as Zip does, that “The average Portland home sold in just 40 days in 2012?” [Underscore mine. – PCQ.] Answer: It’s either wrong or it’s misleading.

ConclusionSo the “take-away” here is that not all numbers qualify as “statistics.” ZipRealty undoubtedly knows this. Sadly, I’m not so sure about the Portland Business Journal – a generally good publication, BTW.  I agree it’s always fun to be named to a Top Ten List – unless it’s published by the FBI – but being on a list does not make the information more reliable.  In fact, without some explanation as to how the information is assembled, the size of the sampling, and the company releasing it, I’d be inclined to regard these stories as nothing more than pabulum for reporters trying to make a deadline.

[1]I say this with utmost seriousness.  Even respectable national newswires such a, can, in my opinion, fall into the trap of running attention-grabbing headlines that are supported by stories containing not a scintilla of sourced material. Example: Consider the recent Bloomberg headline “Recovery in U.S. Saving 8 Million Underwater Homeowners.”  The size of this number caught my attention.  I had seen similar news reports with smaller numbers all over the board, but “8 Million ,” seemed worthy of attention – if true [which I doubted, since the White House would have been pounding its chest on all the national news shows, if it had any validity.] Here’s some of the content: “As prices recovered, the number of underwater borrowers fell by almost 4 million last year to 7 million, according to JPMorgan Chase & Co. (JPM), and could drop to 4 million within 2 years.”  The link is to the JPMorgan website, but there is no reference to any such statistics – just a homepage.  The same oversight occurs with the following statement: “JPMorgan analysts led by John Sim estimate the price growth last year was responsible for a drop of almost 4 million in underwater borrowers. The number of homeowners that owe more on their mortgages than their properties are worth may fall to 4 million by the end of 2015, according to Sim, whose team was the top-ranked for non-agency residential mortgage securities in Institutional Investor magazine’s annual survey for the past four years.”  The “John Sim” link contains biographical information on John Sim, and nothing more.  Although both unsourced statements seem to be saying the same thing, it appears the reporter heard “4 million” twice, and so doubled the figure for the headline. My email to both the author and editor of the story went unanswered.  Welcome to the world of “Wikipedia News,” where opinion, rumor, and a dose of pixie dust, masquerade as “News.”

[2]The publication is called “Market Action” and is released approximately two weeks after the previous month’s stats are compiled.

[3]Note: The “Portland Metro Area” includes Vancouver, Washington, because it is part of the MSA stats used by FHA and Fannie Mae.  But the information is further broken down by geographic area, so we can see prices in various locales in Vancouver, as well as those in east-west Portland, Beaverton, Hillsboro, West Linn, etc.

[4]And the appraisal industry.