Beware of the Big Bad Home Sales Revisions

By Diana Olick, CNBC real estate reporter

NEW YORK (CNBC) -- We already know the housing crash was bad, perhaps the worst in history; Wednesday we will learn that it's worse than we thought.

The National Association of Realtors, for a number of reasons I won't get into because they've been widely reported, overcounted home sales during part of the last decade and has spent the better part of this past year figuring out just how badly they did that.

They consulted with economists at the Federal Reserve, Fannie Mae, Freddie Mac, the Department of Housing and Urban Development, the mortgage bankers, the home builders, as well as umpteen other housing specialists, and tomorrow they will release their results.

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Expectations are that home sales could be revised down anywhere from 10% to 20%. The Realtors' chief economist said the revision would be, "meaningful."

The revisions will likely not change the fact that last year saw the fewest homes sold on record. They will not change estimates of home prices, nor the home price drop since the 2006 peak, nor will they change inventories of unsold homes in month's supply (how long it takes to sell that many homes) although absolute inventories will be revised lower. They will not affect monthly or annual percentage changes in sales recently.

The revisions will also have nothing to do with how many newly built homes sold, nor will they say anything about the health of the nation's homebuilders.

Far more importantly, the revisions will have nothing to do with how many borrowers are behind on their mortgage payments or in the process of foreclosure, which is 6.26 million, according to numbers just released from Lender Processing Services.

The Realtors' revisions will not change the losses at banks, losses to investors, and losses to the now government-owned mortgage giants Fannie Mae and Freddie Mac, nor to the Federal Housing Administration.

The Realtors' revisions will change perception; they may even change consumer sentiment. Headlines will scream Wednesday morning, and reporters like me will jump in with the "breaking news" that far fewer existing homes sold over the past four years than previously thought.