Lies, damned lies and auction clearance rates

Excellent opinion piece by Mark Bayley in the AFR on rigged property auction clearance rates:
http://www.afr.com/p/markets/lies_damned_lies_and_auction_clearance_W8TRvTb1y7Uh84PjPdsWfJ

"I believe the current formulas used to calculate auction clearance rates are inherently flawed and biased. To illustrate my point, turn the question around; what does the general public understand the auction clearance rate to mean and how is it actually calculated?

I’m sure most would think that the auction clearance rate would represent the percentage of properties that sold on any given weekend. Unfortunately that simple explanation is not the case.

I’m sure most would think that the auction clearance rate would represent the percentage of properties that sold on any given weekend. Unfortunately that simple explanation is not the case.

Take this example. If there were 100 scheduled auctions, only 40 were actually sold and 50 auctions were reported, what do you think the auction clearance rate would be? 40 per cent (40/100), right? Wrong! The reported auction clearance rate in this example would actually be 80 per cent (40/50). Crazy? I think so, and my guess is that so would most of the general public."

ABC did a fact check and discovered this to be true:
http://www.abc.net.au/news/2013-12-15/auction-clearance-rates-base-on-incomplete-data/5143856
http://www.abc.net.au/news/2013-12-16/auction-clearance-rates-based-on-incomplete-data/5158480





I experienced this myself in 2012 when I noticed the auction clearance rate clearly not accurate and emailed APM for a clarification and their response was:

Hi Zoran,

The pdf of the results doesn't include suppressed results. Suppressed results aren't published on the pdf but are included in the ACR calculation. Also, the formula should be...

(S + SP + PN + SN) / (S + SP  + SA + SN + PN + PI + NB + VB + W)

Cheers,

Clint McNabb
Research Analyst
Australian Property Monitors
www.apm.com.au
www.homepriceguide.com.au
Fairfax Media
<Deleted details>

On 2 December 2012 15:39, Zoran G <deleted> wrote:

Dear APM,

I follow the Sydney auction clearance rates and I never understood how the clearance rate is derived I thought I'd do some of my own analysis using your published data:

               http://domainmastheads.homepriceguide.com.au/saturday_auction_results/Sydney.pdf

I converted the pdf data into text and then categorised all auctions and found the following:

Result	Number
S (Sold)	112
SP (Sold Prior)	53
SN (Sold not disclosed)	17
SA (Sold After)	2
PN (Sold Prior not disclosed)	20
PI (Passed In)	49
NB (No Bid)	18
VB(Vendor Bid)	30
W (Withdrawn)	50
TOTAL	351

APM's definition of the reported clearance rate is:

(Sold under the hammer + Sold prior)/ (All Sold + Passed In + Withdrawn).

APM summary for Sydney :

                                  Saturday 1st December 2012

                                  Property Snapshot

                                  Total Properties:        363

                                  Sold:                           238

                                  Withdrawn:                78

                                  % Cleared:               54%

                                  Total Sales:             $210,748,800

                                  Median:                   $830,500  www.apmpropertydata.com.au/report/default.aspx

When I calculate clearance rate using your definition I get a discrepancy:

(S + SP + PN) / (S + SP + SN + SA + PN + PI + NB + VB + W)			53%
(S + SP) / (S + SP + SN + SA + PN + PI + NB + VB + W)			47%

I can not understand how you derive your clearance rate of 54%. Can you provide the formula that you  use? Also how did you get total properties to be 363 and number of withdrawn auctions to be 78?

Thanks, Zoran