data are limited (point taken), but what next / NY Times column about the flaws in reported housing data
Economix mixes data and opinion to complain about data
David Leonhardt’s thoughtful “Economix” column this week in the NY Times highlights the conundrum of home price statistics, What Statistics On Home Sales Aren’t Saying.
His general point is easily stated:
The truth is that the official numbers on house prices — the last refuge of soothing information about the real estate market on the coasts — are deeply misleading.
Leonhardt starts his piece with the drama of an auction about a month ago in Naples, Florida at which “a few dozen houses went on the block in front of about 500 bidders”. He quotes one analyst as saying the houses sold at auction lost about 25% of their 2005 value, and contrasts this with the official federal government housing index that showed that the average Naples home appreciated 20% year over year.
the data are what the data are (as Rumsfeld might have said)
Clearly, there is a disconnect between the auction results and the OFHEO index, but Leonhardt takes a curious turn in criticizing the OFHEO data:
But the statistics have a number of flaws, perhaps the biggest being that they are based only on homes that have actually sold. The numbers overlook all those homes that have been languishing on the market for months, getting only offers that their owners have not been willing to accept.
I agree with his general analysis of the weakness in the various statistics commonly reported, but I think he went pretty far overboard in making his point.
The “biggest flaw” in a statistic measuring sales is that it is based only on homes that have actually sold?? What else could that stat be based on?
To say that “sales” data “overlooks” homes that have not sold is really beside the point. To say that you don’t get a complete sense of the market if you only look at “sales data” is a truism – which Leonhardt demonstrates nicely in a journalistic way by using the Naples auction data.
are opinions (guesses) better than data? (not so much)
But I thought it was weird that Leonhardt was so critical about the kind of actual data that is available and supported his argument by quoting one “expert” after another for their “opinions” about what the market is “really doing”. Especially because he didn’t need to do that to support his general point about the limitations in the data.
I find Leonhardt’s Economix column usually interesting because he starts with a fact or some data, then explores what the fact or data means (or, as in this case, does not mean). With so much to talk about, I guess it just bothered me that he “wasted” space by buttressing his point with the opinions of Talking Heads.
Not to mention that he slid a personal opinion about our local Manhattan market in without any visible support:
In New York City, where co-op boards generally bar the door to absentee speculators and creative mortgages, prices seem to have slid a bit in the last few months, but only to roughly their 2005 levels
Given his focus on the utility of data, I wonder what he is relying on for that statement, especially with the NY Post article I quoted yesterday reporting median sales price increases year-over-year of 6.7% or 12.7%. (Yes, there are limitations and flaws in those numbers, but I would expect some discussion – rather than just an un-sourced opinion.)
The oft-quoted Jonathan Miller rode to the rescue with a discussion about the sources and limitations of the data that Leonhardt addressed in his Economix column. He did so much more concisely and comprehensively than I could and – to me – in a much more straightforward way than Leonhardt did. So if you have gotten this far with me, read Home Prices: To Tell The Truth, The Whole Truth And Nothing But the Truth (Sort Of) on Matrix.
© Sandy Mattingly 2006
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