Comments on: The Mesmerizing Magic of the Median: Statistical Sleight of Hand? http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/ Tue, 2 Dec 2008 12:43:14 +0000 http://wordpress.org/?v=2.3 By: How to Lie About California Foreclosures: Use Statistics http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-135294 How to Lie About California Foreclosures: Use Statistics Sat, 20 Oct 2007 15:54:26 +0000 http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-135294 [...] The Mesmerizing Magic of the Median: Statistical Sleight of Hand. Zillow Housing Reports: The Statistical Lie of Estimated Truths. The Power of Print: Perception as Truth [...] […] The Mesmerizing Magic of the Median: Statistical Sleight of Hand. Zillow Housing Reports: The Statistical Lie of Estimated Truths. The Power of Print: Perception as Truth […]

]]> By: Trulia Trend Report Released at sellsius° real estate blog http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-63290 Trulia Trend Report Released at sellsius° real estate blog Thu, 15 Feb 2007 18:04:30 +0000 http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-63290 [...] As you probably know, we are not fans of the statisticians’ magical arts when it comes to selling or buying a home. We’re no experts on this, but this guy is. Frankly, we never met a buyer who bought a house because it was below the average or median home price or turned one down because it was above the average or mean. Love is blind, even to median home prices. But some of these wizards have gone beyond the standard rabbit trick of pulling median housing prices out of their hats to predict housing health (the groundhog is as reliable). In the case of the Zillowists, they are calculating the median of UNSOLD homes to measure a housing market’s health. Zestimated home data pollutes the pure data pool of actual sales. Any report built on these is bupkes in our book. But the Trulia Trend Report is different. [...] […] As you probably know, we are not fans of the statisticians’ magical arts when it comes to selling or buying a home. We’re no experts on this, but this guy is. Frankly, we never met a buyer who bought a house because it was below the average or median home price or turned one down because it was above the average or mean. Love is blind, even to median home prices. But some of these wizards have gone beyond the standard rabbit trick of pulling median housing prices out of their hats to predict housing health (the groundhog is as reliable). In the case of the Zillowists, they are calculating the median of UNSOLD homes to measure a housing market’s health. Zestimated home data pollutes the pure data pool of actual sales. Any report built on these is bupkes in our book. But the Trulia Trend Report is different. […]

]]> By: NAR Reports Sales Down Nationally at sellsius° real estate blog http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-22253 NAR Reports Sales Down Nationally at sellsius° real estate blog Mon, 27 Nov 2006 19:51:20 +0000 http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-22253 [...] The Mesmerizing Magic of The Median: Statistical Sleight of Hand Zillow Housing Report: The Statistical Lie of Estimated Truths The Statistical Shell Game, or How to Spin a Chart Listen to this podcast [...] […] The Mesmerizing Magic of The Median: Statistical Sleight of Hand Zillow Housing Report: The Statistical Lie of Estimated Truths The Statistical Shell Game, or How to Spin a Chart Listen to this podcast […]

]]> By: Andrew Hodge http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20859 Andrew Hodge Thu, 16 Nov 2006 21:05:13 +0000 http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20859 I have posted on this in the past as well. It is not just the median prices that one has to worry about but also the "average sale price", "average days on market" and "sale to listing price ratios". The reality is that none of these statistical values truly relates to any particular type of home. The value of a 2500 square foot home can decrease and you can still have an increasing average sale price if buyers decide to push for bigger homes instead of taking the savings, on the home they would have bought if prices did not drop, or they could be changing the type of housing that they want, say from a condo to a detached freehold home or back. In Richmond Hill the "Average sale price" for October 2006 was up about 8% from 2005 but this does not reflect the true market that has only seen a raise of about 2-3% for a given home. All of these numbers have a greater relationship to buyer activity than to home values. As for "Days on market" and "sale / list price ratios" these are probably the most manipulable values, and many agents re-list or price change homes, just prior to registering the sale so that they can market the home as sold in 5-10 days for 100% of the asking price. The bottom line is that the only way to see real trends or value is by looking at the recent activity of comparable homes on a regular basis. Which is why not every agent is as good at knowing the market as others. I have posted on this in the past as well. It is not just the median prices that one has to worry about but also the “average sale price”, “average days on market” and “sale to listing price ratios”. The reality is that none of these statistical values truly relates to any particular type of home. The value of a 2500 square foot home can decrease and you can still have an increasing average sale price if buyers decide to push for bigger homes instead of taking the savings, on the home they would have bought if prices did not drop, or they could be changing the type of housing that they want, say from a condo to a detached freehold home or back.

In Richmond Hill the “Average sale price” for October 2006 was up about 8% from 2005 but this does not reflect the true market that has only seen a raise of about 2-3% for a given home. All of these numbers have a greater relationship to buyer activity than to home values.

As for “Days on market” and “sale / list price ratios” these are probably the most manipulable values, and many agents re-list or price change homes, just prior to registering the sale so that they can market the home as sold in 5-10 days for 100% of the asking price.

The bottom line is that the only way to see real trends or value is by looking at the recent activity of comparable homes on a regular basis. Which is why not every agent is as good at knowing the market as others.

]]> By: sellsius° http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20416 sellsius° Mon, 13 Nov 2006 20:13:30 +0000 http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20416 Excellent insights on your market Sam. Thank you for sharing real life experience, a much better teacher than statistics. Excellent insights on your market Sam. Thank you for sharing real life experience, a much better teacher than statistics.

]]> By: Sam Chapman http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20415 Sam Chapman Mon, 13 Nov 2006 20:07:39 +0000 http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20415 The median price of a home in Austin is also deceiving. For the month of September, 2006, the median price of a home in the Austin area was $167,000. This sounds great and is much of the reason investors are flocking here. When you look at the Austin market (as in many markets), more home sales are happening in lower priced areas than in higher priced areas. The lower priced areas tend to be to the somewhat distant south, east and north of the downtown area. This is where you can find homes for the median price or even the average price, which was just under $228,000 in September. Now what are the most appealing areas of Austin? Close to downtown and the University of Texas is very popular. To the west in the limestone Hill Country and on or near Lake Travis is also incredubly popular. The problem is that many people think of hills and lakes when thinking of Austin. They see the "cheap" price of homes and think they can get into a nice Hill Country home with a lake view for $250,000. Sorry, but this isn't reality. If you're close to downtown or UT, you can get into a 1200 square foot home for under $300,000 if it needs a bit of work. On Lake Travis, you might get into a tear-down on the south side of the lake with fair lake frontage for around $600,000 if you're really lucky. A nice Hill Country home on an acre might go for $550,000 or so, more if it has a lake view. So don't be fooled. Sure Austin is an incredible place to own a home, but be prepared to really get educated before expecting anything. The median price of a home in Austin is also deceiving. For the month of September, 2006, the median price of a home in the Austin area was $167,000. This sounds great and is much of the reason investors are flocking here. When you look at the Austin market (as in many markets), more home sales are happening in lower priced areas than in higher priced areas. The lower priced areas tend to be to the somewhat distant south, east and north of the downtown area. This is where you can find homes for the median price or even the average price, which was just under $228,000 in September.

Now what are the most appealing areas of Austin? Close to downtown and the University of Texas is very popular. To the west in the limestone Hill Country and on or near Lake Travis is also incredubly popular. The problem is that many people think of hills and lakes when thinking of Austin. They see the “cheap” price of homes and think they can get into a nice Hill Country home with a lake view for $250,000. Sorry, but this isn’t reality.

If you’re close to downtown or UT, you can get into a 1200 square foot home for under $300,000 if it needs a bit of work. On Lake Travis, you might get into a tear-down on the south side of the lake with fair lake frontage for around $600,000 if you’re really lucky. A nice Hill Country home on an acre might go for $550,000 or so, more if it has a lake view.

So don’t be fooled. Sure Austin is an incredible place to own a home, but be prepared to really get educated before expecting anything.

]]> By: sellsius° http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20400 sellsius° Mon, 13 Nov 2006 18:07:55 +0000 http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20400 Surowiecki's article was interesting to me because it showed that statistics like median, taken alone, may not tell the whole story and that housing has unique unzills that do not even get in the data. I was fortunate to have studied statistics under a professor who was notorious for exposing the secret tricks of stat spinning to create a certain picture. Surowiecki’s article was interesting to me because it showed that statistics like median, taken alone, may not tell the whole story and that housing has unique unzills that do not even get in the data.
I was fortunate to have studied statistics under a professor who was notorious for exposing the secret tricks of stat spinning to create a certain picture.

]]> By: Athol Kay http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20396 Athol Kay Mon, 13 Nov 2006 17:38:27 +0000 http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20396 Over a large sample the more meaningful the median becomes. In a five unit sample it's pointless, but in a 100+ sample it's more interesting. Generally you have to look at both the median and the average to get useful information. In the end there are only a few ways to look at local housing data, this is one of them. I do agree that the increase in housing quality is a lost factor though. Once upon a time a 1000sqft house was normal, and now it's a bargain basement property. Over a large sample the more meaningful the median becomes. In a five unit sample it’s pointless, but in a 100+ sample it’s more interesting. Generally you have to look at both the median and the average to get useful information.

In the end there are only a few ways to look at local housing data, this is one of them.

I do agree that the increase in housing quality is a lost factor though. Once upon a time a 1000sqft house was normal, and now it’s a bargain basement property.

]]> By: Doug Quance http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20390 Doug Quance Mon, 13 Nov 2006 17:02:40 +0000 http://blog.sellsiusrealestate.com/residential-real-estate/the-mesmerizing-magic-of-the-median-statistical-sleight-of-hand/2006/11/13/#comment-20390 I've been meaning to write an article like this... so I am glad you brought it up. Both median prices and average prices are indicative of a market, but without careful analysis - they can paint a story that doesn't exist. Let's say, for example, that Daddy Warbucks comes to a town with a median price of $300,000 and tells all the poor people that are currently renting "Come to me, and I will loan you enough money to buy a $100,000 house. Everybody qualifies!" And so they do. So all the activity in that sector of the housing market would force a decline in the median price... as well as a decline in the average price. Not to mention a dip in rental occupancy rates. Did this activity have a negative effect on the upper sectors? Not necessarily. But it could leave the uninformed to believe so. The one thing that these statistics do show is trends... and while trends are useful, they do not tell the whole story. I’ve been meaning to write an article like this… so I am glad you brought it up.

Both median prices and average prices are indicative of a market, but without careful analysis - they can paint a story that doesn’t exist.

Let’s say, for example, that Daddy Warbucks comes to a town with a median price of $300,000 and tells all the poor people that are currently renting “Come to me, and I will loan you enough money to buy a $100,000 house. Everybody qualifies!”

And so they do.

So all the activity in that sector of the housing market would force a decline in the median price… as well as a decline in the average price. Not to mention a dip in rental occupancy rates.

Did this activity have a negative effect on the upper sectors? Not necessarily. But it could leave the uninformed to believe so.

The one thing that these statistics do show is trends… and while trends are useful, they do not tell the whole story.

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