The average SHTF Plan reader has a pretty good idea about the credibility of economic numbers coming out of Washington, private ratings agencies and industry associations.
For quite some time we’ve tried to hammer home the fact that what we are being told and what is actually happening with our economy are two completely different things.
According to Karl Denninger, it looks like another scam is being uncovered as we speak:
I have a very disturbing email that came in this evening.
It alleges out-and-out fraudulent reporting of home sales in one of the regional MLS systems.
That is, prices paid that are in fact much lower than the “sold” prices reported in the MLS.
The person in question claims to have seen over 100 of these in his area.Â I have copies of two, and it appears, from the evidence that I have, that at least for those two the claim is accurate.
One in particular I was able to pull the auction data on.Â It “sold” under reserve, is listed as sold in the MLS at ~25% higher than the “sold” bid, and the premium is disclosed as 5%. This property also has a 90-day “anti-flip” provision on it,Â implying thatÂ the paper may be held by one of the GSEs.Â (It’s a nice-looking place, incidentally.)
Here’s the problem, obviously – Case-Schiller and other “home statistics” numbers related to price paid are all computed off these numbers provided by the local Realty boards (via NAR.)Â If the data in the MLS is bogus then so is the so-called “median sales price” and so are Case-Schiller’s numbers!
These are not small discrepancies either – in both cases the “over-reporting” is by approximatelyÂ 25%!
It looks like the National Association of Realtors is trying to pad their numbers a bit. We can’t have realtors out there telling potential buyers the actual truth about the real estate market. Plus, if a realtor tells a small fib to a potential buyer and ups the price of a home 20% over the actual value of homes in that particular neighborhood, they stand to earn a couple thousand dollars extra, while also contributing to an artificial propping up of home prices nationwide.
Would-be home buyers need to not only trust what the realtor is saying, but verify what is actually happening by checking county sales records for the area.
There is a major disconnect in housing prices right now. Anecdotal evidence in our neighborhood ads credence to this theory. For instance, the neighbor directly across the street has had their home listed on the market for nearly five months. Originally pricing the home at $189,000, they have now cut the price to $179,000, which would be a break-even proposition for them if the home were to sell at that price.
The neighbor, who no longer occupies the home because of a job relocation, is cash-strapped because he’s essentially paying two mortgages now, and there are very few people looking at this particular home. One reason for this may be the fact that there are forty homes for sales in our subdivision. The two streets next to ours have five homes listed for sale, three of which almost mirror the floor plan and acreage of our neighbor’s home. All three are selling for significantly lower prices, with two of them priced at $159,000 and one of them priced at $149,000. It’s hard to confirm, but all three look to be distressed sales.
A prospective buyer entering this particular market, buying the $179,000 home, would obviously be overpaying. But the real estate agents, who we’ve spoken with, indicate that $179,000 “is about the going rate” for homes in this area. Either the agent is unaware of the three other homes that are literally one street over (unlikely) or they are flat out lying.
This is the state of affairs in America’s real estate market.
It’s hard not to trust your agent, after all they’re supposed to be working for you, right? Wrong. Remember that the real estate agents interests, even if you contacted that agent first, lean towards the seller, not the buyer. There are good agents out there, that are truthful with prospective buyers, but because of the deterioration of the real estate market, more agents are turning to fabrications to move homes. If you’re planning on buying a home our recommendation is trust but verify.