The APIs (Spanish association of real estate professionals) are going to go down fighting!

And maybe slightly mislead the public along the way.

It all started on my to work yesterday. The front-page headline from the free daily newspaper grabbed my attention: “Real Estate Professionals Suggest that You Buy a Flat Now”.

I thought: “What the Hell?”

So I went to go find the article, and in the process picked up a “20 Minutos” and surfed El Pais online. They all tell the same story without any attempt to verify if what the APIs say is true. Obviously, the APIs have a vested interested in jump-starting the market. That’s why they want you to buy now. Does good journalism mean investigating the story? That’s a debate for another day, I guess.

Anyway, here’s the API’s argument:

• Prices in Barcelona dropped by 2% in 3Q 2007
• Prices have increased in “only” 4/10 neighborhoods in Barcelona (isn’t that almost half? And in any case, it seems that the prices are rising in the areas in which I’d want to live.)
  • 3% rise in the Eixample Izquierdo
  • 2% rise in San Andreu
  • 1% rise in Sarrí-Sant Gervasi
  • 1% rise in Sants-Montjuic
• Demand from buyers has decreased by about 20%
• Sales are about 75% less than they were in 2005
• 30% of real estate agencies/offices have closed. By the end of the year, that figure will rise to 50%.

The APIs also note that since this is no longer a sellers’ market, they will only work with sellers who accept reasonable valuations and who will give them exclusive rights to show the property.

They say it is as if exclusivity is an advantage for the buyer, but it probably only helps the agency. The APIs try to spin it by saying that exclusivity means that buyers won’t be pressured, but an agency can still “pretend” to have another interested buyer or use other pressure tactics to animate a hesitant buyer. That’s unlikely to change. It’s part of the sales process.

Almost hidden in the articles is the fact that year-on-year, prices in Barcelona are still 2% higher than they were a year ago. 2% is immaterial once you take into account inflation, but it’s still slightly misleading to take the 3Q numbers out of their full context — the real estate market is pretty dead, the majority of real estate agencies need life support, prices are stagnant, but there’s no dramatic increase or decrease of prices.

It’s not clear why now is the moment to buy.

The dramatic numbers — 20% decrease in demand, 75% decrease in sales, 30-50% of the offices are/will be closed — all refer to the dire state of real estate as a business.

The numbers that would be relevant to buyers — 2% drop in prices in 1 quarter / 2% increase in prices — are almost immaterial by comparison and pretty much cancel each other out.

That being said, you have to give the APIs credit. They are resilient and know how to sell a story.