Some members of CEBAA are wondering about the accuracy of the statistics many potential homebuyers are exposed to regarding average home price trends from month to month or year to year.
Some members of our Colorado real estate association, CEBAA, have PhDs, which tends to foster the analytic side of the brain. These folks are looking at reported house price trends as published in major newspapers and finding that the statistical analysis could be greatly flawed.
So if you read somewhere that there is a 7.1% increase in Denver area home prices, put on your own analytical hat before concluding that the recession is over and housing prices are on the upswing. Check with your buyer agent to see if they agree with this conclusion. If prices in fact are still declining, might this have a significant impact on your offer price, if not the decision in the first place to even buy?
The book, “Freakonomics” was one of the first mainstream books to point out how easy it is to “lie with statistics”, or have hidden human motivations be the real reason certain conclusions are made.
An anonymous reporter who works for a major Colorado newspaper confesses that “it’s remarkable that newspapers attempt to cover the industry at all. Our experience during the mortgage melt-down was that we faced boycotts and subscription cancellations any time we reported anything other than “everything’s great!”. She observes that reporters find expert sources with the data and then translate it for a general audience. They are not in a position to critique the data. Keep in mind that most real estate data is generated by metro listing services, which are owned and controlled by real estate people. Both people within and outside of the industry need to challenge the data.
It’s clear that the media are under tremendous pressure to report positive sales increases. Buyers are advised to put on their own analytical hats and get the opinion of your buyers agent.