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Stop the madness

By
Mortgage and Lending with Mortgage Intelligence Mortgage Consulting

Statistics prove one thing...whatever the writer wants them to prove.  Having watched the media abuse statistics to show "important" information, I have become desensitized to words like 3% change in price, 5% increase in forclosures, and the market is down 34% since Jan 24, 2007.  In a normal market, prices fluctuate based on inventory, economy and availability of new product.  A sell out of a new condo unit will spike sales for a particular day, in a particular part of town, for a particular period of time.  Similarly, a sell off of a high end home development due to forclosure will cause a serious drop in price.  What does this mean?  Measured over one year averaged, it means very little, but if you take those stats on a month to month basis or even day to day, you can create a picture of a turbulent market.  I can pick a weekend in my community where 22 million in real estate was sold in one day (new condo development).  Now if I pick a day a year from now and compare it to that period, you will see a 22 million dollar drop in home sales...everybody would get sad from reading a stat like that...but it was a situational condition which created the illusion of price dropping.  Have you read a stat like "home sales are up 400% over the same period last year", "prices are down 5% over same period last year"...meaningless.

Stats measured and averaged over an entire year are worth your time examining, but "same period last year" stats are vulnerable to 1 time anomolies like a new condo unit selling out or a local business laying off staff.   "Pick a day" stats can say whatever you want them to say.  I would suggest media show us a 20 year forclosure rate, a 20 year price index or a 20 year sales picture, but its not that interesting.  It does not sell.

So be aware the next time you see a "same period last year stat" and question what the stat would be if the story was written the next month or even the next day.

Take Care

Steve Bucher

www.mortgagebuilder.ca

Richard Parr
ADT Security Services - Slidell, LA
Home Security Specialist - Greater New Orleans, Louisiana

The other thing the media has become very good at is taking stats and projecting them across the country.  Let's just forget that some markets are stable, some are climbing, and yes we all know, some are doing poorly.  Let's take the huge losses in some parts of the country and group them with all of the country.  Then...We have a catastrophic situation!  That's the media for you!

That is not to say we do not have issues in the real estate market, but just that they should be put into proper perspective.

Jan 30, 2009 06:25 AM
Steve Bucher
Mortgage Intelligence Mortgage Consulting - Kamloops, BC

Good point.  I am an expert at conditions in my community, but am vulnerable to misinformation or broadcast projections for areas outside of my sphere of influence.

Jan 30, 2009 07:10 AM