Interpreting Real Estate Statistics

I love reading Bernice Ross on Inman News.  Bernice is a regular writer for Inman as well as a blogger in her own right.  What fascinates me is her insights into the market and her quick wit.  Today she has started a series on Inman about the real estate sky not falling as is so often published.  Like myself, Bernice realizes that statistics can be made to mean what the interpretor wants them to mean.  Her article today "Put a Gag on Chicken Little" points to a perfect example of statistical conflict!

According to Bernice, much of what is published in the media today regarding real estate has been gleaned from the S & P/Case Schiller Index.  This index has only been resourced by the media in the last couple years.  The S & P is full of doom and gloom regarding the real estate market, but conflicts with the figures published by the National Association of REALTORS® (NAR), the Office of Federal Housing Enterprise Oversight (OFHEO), and Realogy.  According to NAR, OFHEO, and Realogy the real estate market is stabilizing, some markets have shown signs of improvement, and prices have fallen less than 1% nationally. (New figures from OFHEO are published here.)  The S & P reports between a 12% and 13% decrease in prices.  The S & P includes jumbo loans and lends "weight" to certain factors before calculating its formulas.  The other three agencies do not.  As Bernice says, "weighing" factors is done by human judgment and human judgment is not necessarily unbiased!  Scientifically when data produces differing results, it is compared with other sources.  In the case of our real estate market, the S & P index is the odd man out producing results that drastically differ from the other three agencies that are reporting on our housing market.

Why is it that the media has picked up the negative story to publish instead of the more positive ones?  I'm told it's because bad news sells!  My question is whether this bad news can produce a Pygmalion effect on our market.

Comments

[Bonnie Erickson]

Thanks for stopping by, Debbie. I don't want to present the media as the big bad monster, but the pressure of writing content that sells on a daily basis precludes good research and an understanding of the market that those in real estate have. An hour of research does not equal years of real estate experience. Even the real estate agents differ in their opinions, so maybe the news should start billing themselves as tabloids instead of factual conveyors of data! ;-)

[Debbie DiFonzo]

Bonnie -

I have asked myself this very question for months now. I personally am of the camp that the media wanted to create the fear and wanted to create doubt - or as you say, the Pygmalion Effect.

Great post!