REALTOR® MLS Systems Fraught With Errors

Posted by Joe Manausa on Thursday, February 4th, 2010 at 11:33am.

Always consider the source when an article or report is being published about the state of the real estate market. If it is based upon MLS information, just know that in reality other sales (for the past) are being entered every day.

Analytical Realtor Market ReportsEvery month around this time, I am itching to discover the changes in supply and demand in the Tallahassee MLS so that I can anticipate market price movements. What I am hoping to find is an increase in home sales versus the same month in the prior year, and an overall reduction in the inventory of homes for sale.

So I log in to the MLS and download all home sales for the past twelve months and I download all the current listings. After removing all duplicates, I am able to produce the Tallahassee Home Inventory Report that is published on our site and available under the "Downloads" tab. This free download gives home supply and demand information by price range in the Tallahassee Real Estate Market. New homes and existing home sales figures are separate as well.

So, what does the new report say? It says we actually sold 10 fewer homes in January of 2010 than we did in January of 2009! Ouch; seems like the current "up trend" might be slowing or even reversing... But not so fast my friends (as Lee Corso would say).

I am not confident that the Tallahassee MLS information is right. In reality, it is incomplete. But why?

Because REALTORS® are free to post their sales information at their own leisure (or not at all), the history in the Tallahassee MLS is always changing.  After all, the MLS is a marketing and communications tool for sales people, it was not designed to be an analytically sound instrument for gathering market data. Information is fed to the MLS by sales people, not by technicians. For this very reason, it is not my preferred data source of choice, but it is necessary to rely on it for supply and demand relationships.

In order to get both real home supply as well as relative home supply (the number of months of supply of homes, calculated at the current rate of sales), I am forced to use this information. But it is very frustrating. I only do it because this report is a "must have" for home buyers who want to know how aggressive they should be on their offers, and to home sellers who need to know how much competition that they have.

Picture Of REALTOR doing data AnalysisSo why do I share this point on data reliability? Because just about every real estate report issued through the main stream media relies on information provided by REALTOR® MLS systems throughout the world. Even with the growth of the internet, it is still the most complete data set (though sloppy and inaccurate) for analysts to use to evaluate the relationship between supply and demand.

Always consider the source when an article or report is being published about the state of the real estate market. If it is based upon MLS information, just know that in reality other sales (for the past) are being entered every day. REALTORS want to provide comparable sales information to themselves and their peers in the MLS, it just isn't going to be the top priority in the myriad of jobs that have to do each day.

Tallahassee Housing Report

So, our new report showed two very interesting and conflicting facts:

  • Sales in January of 2010 were 10 fewer than sales in January 2009
  • Home sales for the past twelve months were 100 more than were reported last month

What this means in the simplest terms is that over the past 30 days, exactly 100 new sales were reported for dates prior to 2010! The additional sales added to our "history" exceeded the new sales for the month of January, so it represents a significant amount and is statistically relevant. But what can we do ...

Constant Vigilance Yields Market Awareness

By paying close attention to the changes every month, we can discover the underlying trends in the housing market. We also study housing reports created from tax records so we know the total market, not just what is reported in the REALTOR® MLS. Go ahead and download the February Housing Supply and Demand Report, but take the information that it gives you with a grain of salt.

Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.

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