Jul 13, 2011

Chicago Tribune: Realty trade group overreported Chicago home prices

Chicago Tribune reporter Mary Ellen Podmolik has apparently caught the Illinois Association of Realtors publishing misleading information about condo prices in Chicago over the last one to three years. Maybe even longer.
The Illinois Association of Realtors said Monday that the median price it reported for home sales within the city of Chicago was inflated in May and mistakes in its reports may go back more than three years...The state Realtors' group acknowledged the errors after the Tribune, acting on a tip, questioned the accuracy of the May report. The group believes median prices for both condos and detached single-family homes sold within the city contain errors..."It's not just May," said Mary Schaefer, a spokeswoman for the Illinois Association of Realtors, adding that the mistakes appear to go back at least through January. "We're trying to figure out where the bug occurred. We should have caught it. We pride ourselves on having accurate data. We want to make sure there is 100 percent clean data."

The size of the Realtors' errors is statistically significant, at least based on the May median price for condo sales wtihin the city. In its official report that has now been discredited, the trade group previously said that the median price of an existing condo sold in Chicago in May was $299,000, compared with $271,150 recorded in May 2010. In fact, the median price was $243,000, compared to a year-ago price of $265,000, according to data from Midwest Real Estate Data LLC, the multiple listing service for the Chicago area.
Frugal Ben does not like articles about quantitative information that bury the numbers in text. Here is a table which extracts data from the Tribune article to summarize its conclusions:

Median Condo Price
According to:

Realtors Report Tribune Investigators
Claimed Discrepancy

Overestimate Error %
May 2011 $299,000 $243,000 $56,000 23.05%
May 2010 $271,15 $265,000 $6,150 2.32%
Change 2010 to 2011

$27,850 -$22,000

Difference: (Realtor 2011) - (Tribune 2010) = -$34,00

As you can see from the May 2011 row, the Tribune investigation alleges that the Realtors overestimated the median price of condos by a whopping $56,000 - an error of 23 percent! The May 2010 row indicates an error in the same direction, though the error was much smaller.

If you were a condo shopper looking at the Realtors Report column, you might conclude that the price of condos was now on the upswing: The figures suggest an increase of $27,850 in the median price of Chicago condos from 2010 to 2011. The Trib's figures suggest that the median price actually fell by $22,00 in that same period!

If that's not bad enough, Ms. Podmolik reports that even real estate agents "...say they themselves pay little attention to the numbers that are issued by real estate trade groups, whether they are local, state or national." What do they know that leads them to ignore such information from their professional associations? Do they warn you that the industry's figures on the state of the market might be untrustworthy when they are delivering their sales pitch to you?

This is an important story which every condo buyer or seller should read as they form their judgments about the competence and integrity of the realtors with whom they might do business.

There's definitely a mess here in Chicago and perhaps even nationwide. We hope the Trib and other Chicago media continue to examine the matter closely.

Frugal Ben Says:

Something is radically wrong when "professionals" tell you they can correct "errors" in reporting information by looking through data they have been holding onto for years until someone else notices the problem.

As you enter the real estate market, look for sources of market information that have a track record of publishing accurate information.

Sadly, you now are confronted with a difficult question: Do your local real estate professionals really qualify as such as source?

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