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.
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