Apr 14

The full quote, “There are three kinds of lies: lies, damned lies, and statistics” has been attributed to Mark Twain, and it continues to ring true for me. Last week, I quoted a CNNMoney article which stated, “The national median price drop of 5.8%, to $206,200 from $219,300, was the steepest ever recorded by the National Association of Realtors (NAR), which has been compiling the report since 1979.” Now, I cannot dispute the facts. This statement is likely true, but what is the definition of median? Median simply means the middle number, half are higher, half lower. So far so good? But these numbers only represent transactions, not changes in existing values. Without digging deep into the data, one cannot understand the cause of such a drop. A large turnover in the lower end of the market will skew the data to reflect those sales. It’s possible (though not likely) that homes in a given area increased in value, but a combination of people in the higher priced homes simply moving at a below average rate combined with high transactions in the lower end results in median transaction values dropping.

Joe

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One Response to “Lies, Damned Lies, Statistics”

  1. Augustine Says:

    Indeed, either or both house prices are falling or people are smarting up and refraining from overbuying. IMHO, both a positive outcomes of bad decisions and malinvestment from the past few years.

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