Home sellers are crying but the data doesn't seem to reflect their woes.
NEW YORK (CNNMoney.com) -- We hear lots of stories about the pain:
An Indiana man writes to say he can't sell his house even asking less for it than he paid - four years ago.
A Duluth, Minnesota, reader writes, "The housing market is brutal, has been for months. Prices dropping at least $20,000, some as high as $60,000 just to get them sold. Most aren't selling even with the drop."
It's not just the Rust Belt.
A reader from northeastern Connecticut moved to Maine and can't find a buyer for his previous house even though all he's looking for is to sell for what he owes.
A Gulf Breeze, Florida, reader reports, "The market here went sky high and now went down - houses are selling cheap and people are not buying."
Yet, when the National Association of Realtors (NAR) released its third quarter median sales prices, the downturn was very modest, just 1.2 percent compared with 12 months earlier.
The government's Office of Federal Housing Enterprise Oversight (OFHEO) home price index actually showed a gain for the same period.
Why is there such disconnect between the numbers and reports from the front lines?
According to Janet Branton, vice president of business specialties for NAR, one reason is that real estate markets are very local and you hear from the ones suffering the most. "People selling their homes in Florida have a totally different experience than people in Colorado," she says.
But the main factor, she says, is that many consumers - and a high percentage of real estate agents, the majority of whom have been in the industry less than five years - got used to operating in a bubble. "Most agents and many sellers haven't seen a normal market," Branton says.
Expectations also come into play. "What sellers are most complaining about is expected price," said chief economist for the Mortgage Bankers Association, Doug Duncan.
People, he explains, hear that a neighbor's home sold for $500,000. They think that their house is better so it's worth more. They price it at $550,000.
But the house's objective value is really only $500,000. Since the seller has priced it too high, it sits for months. In today's market, the house may not sell, even after a price reduction to $500,000, partially because the house is now slightly stigmatized because it has sat on the market so long. To the seller, the market just stinks.
Another factor may be problems with the statistics themselves. Some of it is just not very accurate, according to Jonathan Miller, co-founder of Miller Samuels, a leading real estate appraiser based in Manhattan.
For example: "A significant portion of the OFHEO index," he says, "is based on refinanced mortgages, not [solely] on actual market transactions."
With a refi, the price recorded is an appraised value rather than an actual market price and could have been higher (or lower) than what the property would have brought if had it been sold.
Miller also believes that bad news travels much faster these days and comes down harder, causing people's perception to be more extreme. "We seem to pile on the cheerleading when the market goes up and we pile on when the market falls," he says. "And we pass the word on faster through the blogosphere."
The one area of the industry that has produced truly negative numbers was new home sales. From peak to trough, the number of new homes sold will drop 23 percent from their annualized rate of about 1.3 million that was attained in mid-2005. That's according to Dave Seiders, chief economist with the National Association of Home Builders (NAHB).
He forecasts that the rate will bottom out early this year at about 1 million and turn sharply up again in the second quarter and reaching a rate of 1.2 million by mid-2008.
But even though the stats on new home sales showed a dramatic drop, new home prices did not. The median new home price came in at $251,700 in November - the latest stat available - up from $248,500 in October and the second highest on record, after the $257,000 mark reached last April.
But there's an awful lot of wiggle room in new home prices, according to Duncan.
"There are no adjustments for differences in the statistics," he says.
The data does not account for rebates, upgrades and other incentives made to goose slow sales, he points out. Builders will throw in granite countertops, hardwood flooring, upgraded appliances, reduced financing charges, even swimming pools, all of which effectively lower the price of the house without showing up in the data.
Duncan is not as sanguine about a swift recovery in the housing markets, by the way. He says that although the fundamentals are still sound - economic, job and population growth is intact - he still believes, based on past slowdowns that the slump will take until at least mid-2007 and likely late 2007, to work through.
"We have to work off the excess inventory before real estate returns to trend lines," he says. That will take 24 to 30 months from the peak, which he has pinpointed as July 2005. Recovery might even take a little longer this time.
"The long run up may mean that the recovery takes a little longer," he says.