Per an article in the OC Register (Orange County, CA), the credibility and accuracy of foreclosure figures released by RealtyTrac are in question. This is important because both the media, government agencies, consumer groups and companies rely on RealtyTrac foreclosure counts to measure what many consider a developing housing crisis.

According to the 11/18/2007 OC Register article:

“questions are being raised about whether the firm’s oft-cited numbers overstate the real dimensions of the foreclosure problem. And that could create a problem for the company’s credibility.

For example, last year, RealtyTrac’s data showed Colorado had the nation’s highest foreclosure rate. That didn’t sit well with state officials, who decided to do their own count of foreclosures and came up with a figure much smaller than RealtyTrac’s. 

RealtyTrac counted 54,747 “foreclosure actions” in Colorado last year.

That number wasn’t useful because it didn’t reflect how many homeowners were actually in danger of losing their homes, said Ryan McMaken, spokesman for the Colorado Division of Housing. “We couldn’t really use those numbers for having serious discussions,” he said.

So McMaken put an intern to work calling all of the state’s 64 counties to get a count of how many homes entered the foreclosure process last year. The number he came up with: 28,435.”

Why is this important and what does it mean to the economy and housing market in general? According to Jack Kyser, chief economist with the Los Angeles County Economic Development Corp.:

“Figures that overstate problems in the housing market “become sort of a self-fulfilling prophecy in that people are afraid to go out and look for a home,” Kyser said.

Moreover, inflated data on foreclosures could prompt politicians to push through ill-considered mortgage reforms.

You do something that’s good, but it’s the law of unintended consequences,” Kyser said.”

Sound familiar?

I’m not claiming in any way, shape or form the housing and mortgage industry problem is not real, however, it is critical those in the media and government agencies use data that provides a clear and accurate picture of the housing market and not base their actions on faulty information.

Remember – Garbage In, Garbage Out.

Earlier this month, Rhonda Porter published a wonderful post in which she wrote:

Senator Robert Bennett from Utah discussed how 15 years ago, the cry from Congress was that credit was not available to the poor and more needed to be done to make home ownership less restrictive.  Now the cry is that too much credit became available.  He went on to say that large institutions who created these programs are paying the price and they should.   As well as people who falsely stated their income to lenders and flippers hoping for “tulip time” by pushing an inflated home price onto another buyer.   

“Markets make better decisions than government.   Markets will punish.   Markets will reward and markets will eventually stabilize”.

Bottom line, it’s CRITICAL government agencies, corporations, the media and academia use accurate data and not politically correct emotion charged ascertains to influence change. Change is good when it is based on accurate underlying information, however beware of individuals or entities looking to enrich and/or make a name for themselves based strictly on an agenda. 


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