Lies, Damned Lies and Statistics

No one quite knows who said it first*, but the saying goes: “There are three kinds of lies: lies, damned lies and statistics.” Keep this phrase in mind when you hear about housing statistics in 2011; they all need to be taken with the proverbial grain of salt.

First, any talk of growth in the home building market must take into account that the market has been dismal the past few years. A 20% or 30% improvement is obviously better than a decrease; but given the overall anemic level of activity since the bubble burst, we’re still talking about a down market. A more revealing and reliable comparison would match any current numbers against a similar time period in the middle of the decade. (Keeping in mind, of course, that those numbers were inflated by the unsustainable housing boom.)

Second, home sales activity and home prices in early 2011 or late 2010, when compared against the prior year, need to weigh the fact that the homebuyers’ tax credit drove the market higher than it otherwise would have been. The credit expired in spring of 2010, followed by a predictable drop in both buying activity and prices.

So when you read housing statistics for the second half or 2010 or first half of 2011, read between the lines. And, as with all statistics, look for the proper context and keep the salt shaker handy.

*Benjamin Disraeli, Mark Twain and others have been credited with coining the phrase about lies and statistics, but it remains unclear exactly who said or wrote it first.

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