Housing Statistics: Don't Let the Numbers Fool You!

Bill Ireland
January 10, 2012 — 1,159 views  

According to a recent survey, housing is one of the top issues on everyone's minds, and for good reason: The overall economy can't recover fully until the housing sector does. Most Americans have been touched by the housing crisis, whether through foreclosure, lost equity, or simply by watching their neighbors suffer. Not surprisingly, consumers are paying more attention than ever to national housing trends. But for those unfamiliar with housing data, the signals can be confusing-if not downright misleading.

For instance: An industry report showed that home prices rose almost one percent in July. The same report also showed that prices fell by over four percent. How can that be? Turns out, the first figure compares prices to the previous month, while the big drop was compared to prices at the same time last year.

Which is more significant? Unfortunately, prices typically rise in the peak of summer, so a one percent jump from June to July isn't much to celebrate. The year-over-year number indicates that home prices are still heading downward overall.

Counting Twice Another example: According to RealtyTrac.com, foreclosure actions were filed on 230,678 homes in October 2011. That's a lot for one month, right? If that trend were extended over a year, it would mean 2.76 million foreclosures! But remember, foreclosure is a process that involves several actions; the statistic above includes Notices of Default, Notices of Sale, actual sales, and subsequent repossessions. If a single property received each of those in the course of a year, it would show up four times in the stats. Maybe things aren't so bad after all!

The Median Muddle Here's a another one: According to one analysis, the median home price in July, 2011 was $182,600-up almost one percent from the year before. So, that means prices are climbing again, right? Maybe not. The median is the point at which half of homes sold for less, half for more. A jump in the median could simply mean that more expensive homes are selling than cheaper ones. What's more, homes fall into definite categories, which have distinct price characteristics: does a statistic include new homes, or just existing ones? Just single-family homes, or multi-units and condos? These factors can radically skew the numbers, up or down.

Making Sense Obviously, you have to dig a little bit to know what you're looking at. Two good rules for interpreting statistics:

  • Know what the numbers represent.
  • Make sure you're comparing apples with apples.

 And as everyone knows intuitively, what really matters is what's happening locally. Want to know about your home's value? Don't bother looking at national trends. Don't even bother with average values in your city. Compare homes of the same size, age and area as yours. And only look at recent, closed sales. The prices could vary drastically month to month, and asking prices are meaningless.

The same principle applies to general sales activity. Your neighborhood could be experiencing a surge because a big company just opened a warehouse down the street. But that may not affect the folks two towns away.

You can make sense of the housing scene. It will just take some time-and insight into what you're reading.

_________________________________________________________________________________________________________________________

Bill Ireland Senior Editor, PartnerFirst http://partnerfirst.org http://billireland.com

 

Article Source: http://EzineArticles.com/?expert=Bill_Ireland

 

Bill Ireland