Getting Graphic is a semi-sort-of-irregular collection of our favorite real estate-related chart(s).
In Daniel Gross’ terrific article When Sweet Statistics Clash With a Sour Mood [NYT]  he addresses the disconnect between the mood of the consumer and national economic statistics. I have been scratching my head lately at all the positive economic news and the inflation threat from an overheated economy.
Over heated economy? I have had many a discussion with various economists and despite the profession’s reputation for being worriers, lately I have found them to be just the opposite. I don’t feel their same optomism. Why?
Daniel Gross attempts to explain this abstract disconnect. Here are his major points:
The median net worth of a US family remained unchanged from 2001 to 2004
Only 6 percent rated the economy as very good, while 46 percent said it was fairly bad or very bad. And consumer confidence plummeted last month, according to the Conference Board. This strange and unlikely combination — strong and healthy aggregate macroeconomic indicators and a grumpy populace — has been a source of befuddlement to the administration and its allies.
Average net worth increased 6% from 2001 to 2004 while median net worth was flat suggesting that only the upper demographics have seen real improvement. These numbers are fairly shocking to me since housing prices have increased significantly over this period. This would seem to indicate that property owners have taken on a lot more debt. With home equity loans generally tied to adjustable rates and the fed posturing for another rate increase after two years of them already, the future doesn’t look so bright.
CPI is one of the main culprits
“It has no direct relationship to what people perceive as inflation,” he said. Mr. Baker notes that the index doesn’t take account of rapidly rising co-payments and higher insurance deductibles when it calculates health and medical costs. And to gauge inflation in housing, the index approximates a measure of rent instead of looking at home purchase prices.
“We’ve had a huge run-up in the price of housing, and that doesn’t show up in the C.P.I.,” he said. So while the index shows that inflation is elevated but still under control — up 3.5 percent from April 2005 to April 2006 — many Americans find themselves paying sharply higher prices for essential goods and services.
I have posted about CPI calcs  on a number of occasions.
Statistical aggregates and averages are also to blame
Many of the macro stats that are presented monthly don’t apply to individuals. Mark Zandi of Economy.com provides a great quote:
“If you put one foot in a tub of hot water and the other in a tub of cold water and take the average, everything is fine.”
My junior high school gym teacher once told me, “If you are running 4 mph with a friend and he jumps on your back, you don’t go 8 mph” (perhaps this is why I didn’t become a gym teacher).
I get this sort of feedback from my market reports  and my weekly Three Cents Worth  posts on Curbed. The readers want to know what the numbers means to their specific properties and not just to the market in general, something that aggregate statistics can not provide (thats what a property appraisal does.)
Timing is also a key factor
The OFHEO housing index that was released last week was a 1st quarter closed sales report so its based on contracts from November to February. Its hard to relate that to today’s market. On the other hand, and probably even more misleading, is the attempt to issue market reports in shorter time frames with inadequate data. We often see attempts to issue real time, weekly or monthly reports, for the sake of being current. However, the size of the data set drives the frequency of the report. The report does not drive the data. I see this on a local and national level and it only serves to confuse the consumer.
Now consider the fact that the housing market slow down will be just hitting the national stats in the coming months. The Fed is pondering its next move this month. That does not provide much confidence to consumers that they will make the right move, does it?