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MLS Phantom Listings Distorting House Prices

Daniel Tencer – Huffington Post Canada

A real estate consultant’s warning that housing market data in Canada is being artificially inflated has some economists and market observers wondering whether the recent upswing in house sales and prices might be partly an illusion.

Real estate consultant Ross Kay alleges that realtors in certain parts of the country — particularly in Greater Toronto and southern Ontario — are artificially inflating home sales by listing the same property twice, or sometimes even three times.

Kay says when a double- or triple-listed house like this sells, the additional listings are counted as a sale by every one of the real estate boards to which the house is assigned. That turns one sold house into two or three sales in the housing data.

Comment: That is so wrong it is not even funny. When properties are re-listed, it actually has the completely opposite effect, creating more listings per sale, skewing the ratio in a negative way. If ever house is listed once and sold, then there is a 1:1 listing to sale ratio. If each house is listed 3 times, then there is a 3:1 listing to sale ratio. The same number of houses sold, but it makes it look like 1/3rd of listing sold, as compared to all of them. That messes up the data, yes, but not in the way this person is claiming.

The end result, Kay argues, is that reported home sales and house price numbers are higher than they really are.

Comment: How this changes price, I have no idea. Multiple listings only creates more listings. Whatever the house finally sells for is not influenced by the number of times it is listed.

“Statistically valid month-over-month comparisons on sales volumes are inflated as much as 15% in some cities in 2013,” he told HuffPost in an email. “Average prices are skewed upward as much as 10% some months.”

Comment: That makes no sense at all. None.

This screencap of homes for sale in Oakville, Ont., as of last Friday, shows a significant proportion of houses have “phantom listings.”

listing screencap

Comment: That image is totally misleading. When looking at out of town properties, MLS gives them a different MLS#. I have no idea why the system does that, but it has do with the interaction between MLS and realtor.ca. Check with one of the techs at MLS or realtor.ca, they would be able to explain. But to show a house that has been listed more than once, which happens when it does not sell and is put back on the market. The screen cap shows the old listing, the new listing and the weird realtor.ca MLS #. What appears to be 3 listings is actually 1. I pulled it up on MLS and there is only one listing for that property – which means only one would be able to sell. Look below to see the screenshot from MLS – NOT realtor.ca.

ScreenShot001

Ross Godsoe, CEO of the Realtors Association of Hamilton-Burlington, said Kay is “probably correct” in his claim that houses are being double- and triple-counted.

He told HuffPost Canada that any house listed in his area — even if it is listed elsewhere — would count towards the monthly sales numbers.

Comment: But no one lists them in more than one area. Why would I list a property of mine in Toronto, on the Hamilton MLS system? Never mind the fact that I can’t, but why would I do that? I never seen Burlington or Oakville listings on the Toronto MLS.

Godsoe could not say whether other real estate boards operated the same way. Calls to several other real estate boards in southern Ontario were not returned as of press time.

Under Ontario’s realty rules, realtors can’t be prohibited from listing houses in areas other than their own, Godsoe said.

Comment: Maybe not (though I find that VERY hard to believe – we are bound to certain standards that would prohibit listing properties where they aren’t located, so it is prohibited, in a more roundabout way), but there is no benefit at all to me to list a property elsewhere. It just makes me look stupid listing a Toronto house in Grimsby, why would I do that? And again, to repeat, I have never seen listings from outside Toronto listed on the Toronto MLS. Thus, I can only assume that it does not happen elsewhere. The screen shot from above does not indicate that, it only shows how one property can have 2 different MLS #s – which would only count as one sale, as only the current and active number starting with a letter would register the sale.

“If a sale occurs, we’re obligated to report that,” he said, adding he did not know what the Canadian Real Estate Association (CREA) does with the numbers once it receives them.

CREA’s monthly numbers are arguably the most closely watched indicator of housing market health.

CREA spokesman Pierre Leduc told HuffPost the association checks the data coming from local boards to ensure houses aren’t double-counted. That contradicts what Kay and others have said — that CREA only gets aggregate numbers from the boards, and has no way of telling whether houses are being double-counted.

“CREA takes the amalgamated data… from over 70 regional MLSs and adds it up and reports on it — no addresses are ever provided — without the ability to audit the data,” Kay told HuffPost in an email.

UPDATE: In a follow-up conversation, Leduc clarified that most real estate boards send the association only aggregate data, meaning CREA would not know if houses are double-counted. But for the handful of cities used in its house price index, CREA checks the data to eliminate double-counted houses, Leduc said.

CREA chief economist Gregory Klump could not say if CREA’s data included double-counted houses. But he estimated the phantom listings account for no more than 0.8% of the housing supply available.

Godsoe of the Hamilton-Burlington board similarly said any effect phantom listings would have would be “very minor.” He said he is “absolutely” confident in the reliability of his real estate board’s numbers.

At the local level, the impact can still be significant. If a significant proportion of houses have double listings in places like Oakville, that could cause meaningful changes in house sales numbers for Hamilton, the Peel region and Greater Toronto.

Comment: My experience with these stupid phantom listings is zero, none, never seen it. And CREA estimates 0.8% nationally (which I find VERY high) – yet you are assuming that suddenly it is “a significant proportion” in one area. That goes completely against the evidence…

And because the Toronto area is weighted so heavily in house price indices, it could be distorting national data as well.

In his own audit of CREA’s data, Kay said there were 2,902 more home listed as sold than there really were in August of this year. While CREA reported 40,315 homes sold in Canada in August, Kay’s audit found sales were only 37,413 — a difference of 7.2%.

Comment: What? This guy went through 40,315 listings from across the entire country and found 2,902 duplicates? I don’t believe that, not for a minute. The fact that it would take at least 28 days to go through the data at 1 minute per listing. Seeing as the August data has only been out for just over 2 weeks now shows this to be impossible. I have trouble believing he even had access to the data – did he ask for, and receive it, from more than 70 different real estate boards across the country? And he asked them all, received all the data, then parsed it all in the 16-odd days since the data became available. Less time even, to give the reporter time to write this article? Maybe so, but it all sounds logically implausible to me.

While CREA’s numbers report home sales in total are down 2.9% for the year to date, compared to the same period last year, Kay’s audit found a decline in sales of 9.6% this year so far.

Comment: Huh? So now he audited all of the data from the first 8 months of this year? And all of the August data? In 2 weeks… uh huh. And of course, counting differently gets a different number. Truly, it does not matter. What we are comparing is the difference, from month to month or year to year. As long as the counting system stays the same, it is the difference that matters. Comparing 10 to 20 is the same as comparing 20 to 40 – there is a 50% difference. Which is correct actually does not matter, as long as you use the same system month after month.

Housing “remains fully in a full market correction phase,” Kay concluded on his website.

Comment: Wow, yet again there is that one single person who thinks that everyone else is wrong and they are right. Sure, this one guy knows better than everyone else combined. Right…

Kay’s claims have some economists wondering about CREA’s numbers.

BMO economist Benjamin Reitzes noted the controversy in a client note Monday morning, and told HuffPost Canada he found that the sales numbers from the local Toronto-area boards compared to stats from CREA “were off just a little bit.”

Comment: And there is always one guy who claims the earth is flat – it does not mean that there is controversy or 2 sides to the story. It means there is one single person with an opposite view. Same with climate change, 10 people disagreeing with 10,000 does not mean there is no consensus.

But Reitzes and other market observers said the practice was unlikely to raise house price numbers, because it increases the apparent supply of available houses as much as it increases the sales numbers.

Comment: Kind of like I said, it increases the available listings, which skews the math the opposite way than is being claimed.

Kay disagrees. He says the double- and triple-listings are concentrated more at the top of end the housing market, and those increased “sales” at the top end are pulling up the average house price.

Comment: Oh, right, of course. The data is only skewed where it supports the contrarian hypothesis. Standard tinfoil hat bunk, cherry pick the data to support your pre-conceived notion.

Kay says the entire practice is possible because “the MLS infrastructure legally requires silence and non-disclosure of any fact that could negatively impact any active listing on the MLS or any of its members.” He says this has become a massive problem in reporting MLS data since 2010.

Comment: What? MLS requires quite the opposite. All data is there, every listing is preserved. I can do back and see what my mother sold her house for in 1997. Everything is transparent, the data is all there, listings and prices and everything else. What this talk of “silence and non-disclosure” is I have no idea.

BMO’s Reitzes, like some other market observers, highlights another potential area of unreliability. He says he was told by CREA that the association doesn’t adopt revisions made to earlier numbers from local real estate boards — something he calls “a bit of a red flag” on the data.

Comment: What sort of time frame are we talking here? If Toronto changed data from 6 months ago, I could see CREA not updating their math. If they had to track 70+ regional boards for revisions for months and months, that would get unwieldy. Or, could it be that the regional boards do not send revisions for months past to CREA? Regardless, how big a change is ever made? I cannot recall TREB ever sending out a release saying they changed the numbers for a previous month.

Canada’s housing market has been showing surprising strength in recent months, after a slowdown last year following the introduction of tougher mortgage rules.

CREA’s own numbers, released Monday, show home sales rising 11.1% nationally in August from the same month a year earlier.

The Toronto Real Estate Board reported a 21% jump in house prices from a year earlier for August, while Vancouver saw sales soar a stunning 52.5% jump in the same period, according to its local real estate board. There are few “phantom listings” in evidence in the Vancouver market.

Kay’s website features a warning not to trust home sales numbers for both Toronto and Vancouver.

Comment: No, of course not. Let’s not believe the 80,000 buyers, sellers and agents involved in the 20,000 monthly sales between the 2 cities. No, ALL of them are in on the conspiracy to rig the numbers. Especially the buyers, all 20,000 of them. They are in on it to push prices up because they want to pay more. Think for a minute, that is what he is saying, to believe him and not everyone else. Bet he knows what really happened to JFK…

“If you need statistics in any of these areas DO NOT rely on the real estate associations serving those communities. You must get audited data for these areas,” the website states.

Comment: Sure, get someone else to do their own special math, because it is better.

UPDATE: Caroline Feeley, a sales rep with Sutton Group Quantum Realty in Mississauga, writes in to say she agrees the double and triple listings are distorting the statistics.

“I am not at all pleased with loading a listing three times and I feel that it is ridiculous to have to do so,” Feeley writes. But she explains she has no choice, because of the way the “fractured” real estate board system works. In her own words:

What you don’t know and what the public doesn’t know is that the listing needs to appear separately on the Toronto Real Estate Board, the Oakville, Milton and District Real Estate Board and the Realtor’s Association of Hamilton and Burlington for Realtors to be able to search the full listing from their home board. What this means is that if I were to only list the property on RAHB, realtors from the other boards would not be able to search and find the full listing! Since most properties are purchased with a buyer working with a realtor, I will do everything I can to ensure that realtors across the real estate boards have access to all my listing.

My listing in Waterdown should, at the very least, be listed on RAHB because this is where the property is located, and local realtors need to have full access to the listing. But why should Oakville and Mississauga agents not also be able to see this listing on their board? To me, it’s ridiculous that they don’t automatically have this access. A lot of real estate transactions are from people moving east to west. If my listing on Victoria Street was not also listed on OMDREB and TREB, I would potentially be excluding all the prospective buyers working with realtors on those boards.

As long as we have multiple real estate boards in the province that operate this way, a good realtor will list on multiple boards. I hope that one day soon, there will be an amalgamation of boards or some way that we can ensure all realtors have full access to listings, but until that day, in my practice anyway, the numbers will be distorted as I continue to serve the best interest of my client.

Comment: That makes no sense. The new MLS system allows me, a member of the Toronto Real Estate Board, to search an area from Grimsby to Wiarton to Eels Lake (north of Peterborough) almost to Trenton. If she is choosing to list it all over the place, that is her prerogative to do so. No one is forcing her, she does not have to. While my access to Hamilton, say is not perfect, if I have a client looking in that area, I simply use realtor.ca or connect with a local real estate agent to help me out. If she simply listed it on the Hamilton MLS system, I would be able to see it. Maybe she just does not understand the new system and the new agreements between boards. It is people like who are causing the problem, not the boards or associations and not the majority of realtors out there. This seems to be a piece quoting people with an agenda, or a limited grasp of the situation, to try to spin out a negative piece to keep the negative pressure on real estate agents. No, the market is not good, it really is crashing while everyone lies to you. Real estate agents are liars who will do anything to game the system… god this crap offends me to my core.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.

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