Existing-Home Sales Methodology

Each month, the Research Division of the NATIONAL ASSOCIATION OF REALTORS® receives data on existing-home sales (single-family, condos and co-ops) from local associations/boards and multiple listing services (MLS) nationwide. NAR captures 30-40% of all existing-home sale transactions with its monthly survey. The data provide the total number of closed existing-home sales in each association/board/MLS and also total sales within price categories ranging from less than $30,000 to more than $600,000.

Participants of the survey are situated in every region of the country and provide wide geographic coverage of the existing home market. While almost all reporting associations/boards/MLSs are located in, or adjacent to, metropolitan statistical areas, comparisons of their sales with the American Housing Survey (Census Bureau) show that, as a group, their experience is representative of sales activity and prices that generally prevail in each region of the country.

The statistics are published for the United States and for the four census regions of the country. State volume is based on the entire survey of nearly 700 associations/boards/MLSs and is reported quarterly to ensure each state receives optimal representation.

The methodology in calculating existing-home sales statistics is really quite simple. The monthly EHS economic indicator is based on a representative sample of 160 Boards/MLSs. The home sales data (raw data) is divided into the four census regions: Northeast, South, Midwest and West. The raw sales volume from the participating Boards/MLSs is carefully evaluated by NAR economists to ensure accuracy. Some of the possible problems with the data could be caused by:
  • Changes in association/board/MLS physical jurisdiction
  • Changes in MLS vendors and /or staff
  • Lack of response by associations/boards
  • Erroneous data

Once the “problematic data” have been extricated from the sample, the aggregated raw volume figures are weighted to accurately represent sales activity for each region of the country. This is also called the non-seasonally-adjusted volume. The weights are benchmarked every 10 years to reflect shifts in regional demand. (For more information on NAR’s weighting system) The non-seasonally adjusted volume is then converted into seasonally-adjusted annualized rates. (See section on Seasonal Adjustments)

Similar procedures are used in calculating the quarterly state volume estimates. The quarterly state volume report uses the entire data-set (nearly 700 associations/boards/MLS). Due to the significant differences in sample size for the two reports, the state estimates must be adjusted to conform with regional totals.

Sales Prices

Median and mean (average) prices are computed for the nation and four census regions on a monthly basis. Median prices are also calculated for selected metropolitan areas and are reported quarterly to give adequate time for data gathering. Due to the nature of the distribution of home sales prices, the mean sales price is usually higher than the median price. There is a slight degree of seasonal variation in reporting selling prices. Sales prices generally experience the largest gains in the summer months, as favorable weather conditions create an ideal atmosphere for buying and selling a home. Demand for homes usually hits its seasonal peak in the third quarter, and strong price appreciation generally follows suit, and then declines moderately over the next three months. Despite the slight seasonal variances that exist in the price series, sales prices are not seasonally adjusted. The reason for this is that seasonal variances are extremely fickle and difficult to gauge. Furthermore, changes in the characteristics and size of a home have a more pronounced effect on home prices.

Seasonal Adjustment-Annualized Rate?

It is necessary to “annualize” and seasonally-adjust the existing home sales data so that month-to-month and quarter-to-quarter comparisons can be observed without seasonal variances distorting the overall picture. The annual rate for a particular month represents what the total number of sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonal adjustments, which are determined by using the X-11 Variant created by the Census Bureau, are then used to factor out seasonal variances in resale activity. For example, home sales in the winter months are generally much slower than sales in the summer months, primarily because of differences in weather. These disparities tell us little about actual trends in the housing market because they are mostly a result of seasonal variances. Therefore, we need to remove seasonal variances and create an annualized rate to gain a greater perspective on how the resale market is performing. Seasonally-adjusted annualized figures are reported for both our monthly and quarterly reports.

The Outlook

The NAR research group continues to work diligently on expanding our regional coverage to ensure accurate representation among different areas of the nation. Enhancing our sample size has also prompted the Research Group to develop new reports that will help our members utilize the information to their full advantage. One report underway would capture median and average existing-home sales prices at the state level. Sales prices are currently reported only at the regional and national level, as well as for selected metropolitan areas. The staff is also working on generating statistics that will follow the nine census divisions. This in effect will create a new data series that will further refine the information to a more useful level for our members. Finally, the NAR research group has begun customizing statewide home sales reports, which give a detailed breakdown of housing activity for each participating state. The state report will include features such as median sales prices and home sales volume at the county level, as well as a housing affordability comparison of the state to the nation.

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