Another post title could be: Housing Anecodotes Versus Reality: Which Is More Reliable?

I don’t think there is a correct answer to that. Each has its strengths and weaknesses and there are plenty of both to go around. In fact there is so much that goes around that the relative value of each piece of information is decreasing. In the article Home Price Anecdotes vs. Statistics: Which Is the True Market Barometer [SeekingAlpha]?

Anecdotal reports, builder incentives, median vs. mean, wildly divergent geographical sampling, the role of home improvements in successive sale pricing, and a myriad of other factors have made it exceedingly difficult to assess the true state of housing markets, both in the U.S. and around he world.

  • Housing Anecodotes
    Real estate brokers are on the front lines and have different experiences every day. If the broker has a good run over the past several months, its likely that their housing opinions will be more positive than someone who is on a dry spell. Quite often a person’s most recent experience becomes the current state of the housing market. Therefore its hit or miss whether the recent experience is consistent with the general trend. Quite often, actual data only takes the analysis so far and anecdotal experience connects the stats from the end of the period analyzed through today. Quite often the housing statistics that are relied on a broad in scope and don’t apply to a specific market or property. Thats why its aggregate. Housing statistics are a compilation of a market area, not a specific property. When you drill down deeper to more specific market, the data eventually becomes worthless as a tool. For example, a specific neighborhood had 2 sales last year of $500,000 and $1,500,000. The average sales price is $1,000,000. This number means nothing. Talk to a real estate broker or an appraiser who works heavily in a specific market area. Those are the best sources of anecdotal housing market impressions to bridge the gap.
  • Housing Statistics
    They provide a broader perspective of the direction of the local or national housing market. They are tools to analyze broader market trends during specific periods of time. The lag time between the “meeting of the minds” between buyer and seller are behind the curve since the properties usually close 30-60 days after the contract price is set. As long as the user understands this, the information is not misleading, it just lacks the context of the current day. The bad rap housing statistics have been given is that they are often misleading. Thats not the statistics’ fault. It is the way they are presented. I am struck by how many organizations publish data and then misrepresent what they mean. Besides price trends, statistics can show purchase patterns, the mix of property types that sell, price differentials for different proprerty types. The list goes on and on.

One Response to “Housing Market: Skateboarding Through Lies, Damn Lies, Statistics and Ancedotes”

  1. Thane says:

    Re broker anecdotes, this is so right. I ran into my buyer broker on the street last weekend; he’d helped me buy a 2mm apt earlier this year. He raved about the market condition, saying he was actively working with 5 clients seeking 5mm properties. To him, all is right in the world. But what about…

    –who knows what these buyers will ultimately pay in relation to the asking, or what return those sales will represent for the sellers –maybe this broker is an up-and-comer (hey, that’s why I chose him:-), whose personal career is blossoming despite general market trajectory