In the past, when bad news had to be conveyed, it was customary to say "don't kill the messenger." It was the messenger's a way of saying, "I sympathize with you!" Well, it's time to rethink that policy. Based upon all the bad news coming out of the real estate industry - a substantial amount of which is coming from NAR itself and the usual media channels - there might be no better time to say: Off with your heads!

Where am I coming from? Well, just look around at the news reports on NAR's latest Pending Home Sales Index (PHSI) just released: Woe. Gloom. Doom.

Actually: BS! It's all a game of hocus pocus reporting when it comes to creating a story from misleading statistics. Let's look at the numbers (which, of course, nobody ever reports. They only talk about the percentages, which are great storymakers but terrible decisionmakers. Remember, a 100% increase in sales can be adding 1 customer to an existing customer base of 1. Sounds great in percentages; in real terms it's dumb. But I digress. The numbers.....)

Here's what the media is reporting: http://www.consumeraffairs.com/news04/2007/09/pending_home_sales.html

Pending Home Sales Index Tumbles

No relief in sight for the troubled housing industry as mortgage disruptions work their way through the housing market.

The National Association of Realtors says its Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in July, fell 12.2 percent to a reading of 89.9 in July from the June index of 102.4, and was 16.1 percent lower than July 2006 when it stood at 107.1

Now, let's look at this release: What it sounds like is "housing is down to a six year low" and is "further slowing down." And, factually, it is - if we continue to compare the market to last month and last year.

Interesting, however, how nothing "positive" was said about last month or last year. Positive about this market? Sure! First, consider this:

An index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed. Coincidentally, 2001 was the first of four consecutive record years for existing-home sales. 2001 sales are fairly close to the higher level of home sales expected in the coming decade relative to the norms experienced in the mid-1990s. As such, an index of 100 coincides with a historically high level of home sales activity.[Emphasis added]

Now, this little quote comes directly from NAR's own website (http://www.realtor.org/Research.nsf/Pages/PHSBackground?OpenDocument) where it explains just what the PHSI is and how it is calculated. For starters, it's an explanation that the "100" benchmark is from 2001 - a time which itself was a period in which home sales rising against 1990s norms. And the 100-benchmark was also established during the start of a four year period where the numbers were so high, they were record breaking.

Now, compared to both of those standards - a high benchmark to begin with and a subsequent period of record breaking levels, of course we call today's sales numbers "a slowdown."

But a slowdown from what? Well, from record-breaking periods. More importantly, so what? Does the slowdown mean people have stopped selling and buying homes? Well, to hear the media (and NAR) tell it, nobody's selling anything. It's all stopped. Housing is dead. Crushed. Doomed! EEEEEEEK!

Calmer heads might say, Gimme a break. This is news screeching for news' sake, not statistically important analysis. Oh, and let's just prove that little hypothesis: Here's the actual CHART of numbers from the NAR's media-buzzing press releases:

2004 120.9
2005 124.4
2006 111.9

2006
Jul 107.1
Aug 108.9
Sept 107.6
Oct 106.8
Nov 108.4
Dec 113.3

2007
Jan 108.5
Feb 109.7
Mar 104.8
Apr 101.2
May 97.5
Jun 102.4
Jul 89.9

vs. last month:
-12.2%

vs. last year:
-16.1%

Now, let's interpret these numbers:

First, 2004 represented a 20.9% higher-than-already-high-benchmark-at-100 market indicator. 2005 was 24.4% higher; 2006 only 11.9%. Now skip the monthly numbers for 2006 and go directly to 2007.

If you look at the numbers, you must conclude the following:

Heck, it isn't such a bad market! Every month except May and July 2007 was above the index baseline established in 2001. So almost every month this year has been UP relative to the benchmark. That's right - the market is UP. And we CAN say it's UP because it's up against the same 2001 index that was used to say the market was UP in 2004-2006. In other words, if it was up against 100 in 2004 and it was up against 100 in June 2007, then the market is UP - period!

Now, is the market "down" compared to previous years? Certainly. Compared to 2004 and 2005, the market is "down" but that's a relative market indicator. And it has already been conceded that those years were record breaking years. Years that broke a lot of rules - like the rule of sensible financing and sensible pricing so buyers didn't end up in credit disasters - but that's not the key point here. Sure, the current market is off against record-levels within the benchmarked period, but in absolute terms, it's still up over a six year period.

Why isn't this story being reported? What kind of crazy double standard is the press (and some at NAR itself) playing at? First, they are happy to content that the benchmark is 2001, so years above 100 are "up" - but then they quickly shift to calling the market "down" only within the scaled period - not against the actual benchmark. It's a trick they get away with ONLY if they fail to tell you that the numbers are relative internally to the scale; because against the benchmark (in real terms) they are still up.

Even if we concede that May and July were below 100, the average for the year to date is stlil 105.08%. And that's still UP against the benchmark.

Oh, it's a familiar old trick. Like saying "gas prices are at an all time high" when they hit $3.50 - which they are in numerical terms. But when someone comes along and accounts for inflation, gas prices are today still lower in real terms than they were in 1980.

But there's no media story in that. No buzz. No hype. No handwringing to sell. All of which does nothing but confuse the public and depress them and create further slowdown because they are being fed a line, rather than the facts. When the thinking is done for them, it comes with the slant as well. And the media - long hostile to the real estate industry as overpaid, underprofessional and guilty-of-who-knows-what-else - wouldn't possibly want to give it a fair shake, now, would it?

And that's why it might just be time to start killing the messengers.

Before they finally do kill the marketplace.