What do Government housing statistics and Zillow estimates have in common?
This week the Department of Commerce released its figures for new construction residential sales in June. Correction, make that its estimate of sales of new construction in June.
The headline news was that sales were up 8.3% to an annual rate (seasonally adjusted) of 497,000. Pretty good.
There is, however, a caveat: the 8.3% number is plus or minus 20.5%. In case we don’t know what that means there is a footnote to explain that, because these numbers are obtained from samples which may have errors, the range is actually from down 12.2% to up 28.8% above the May 2013 number. And the 38.1% increase above the June 2012 number was plus or minus 22.0%, meaning a range from up 16.1% to up 60.1%.
So the conclusion is that new construction sales are up: plus or minus, and seasonally adjusted, of course.
The similarity with Zillow estimates? A house currently for sale in Marblehead carries a Zillow estimate of $4.2 million with a range of $2.5 million to $7.3 million, or minus 40% to plus 74%.Or as the Government would say, from minus 40.5% to plus 73.8%.
I love the precision of Government estimates, I mean statistics.
Hi Andrew –
Thank you for your reply.
Your reasoning and example supporting your comment: “I do not share your opinion that data beyond the immediate community is meaningless” didn’t convince me.
I have always assumed your blog was primarily focused on helping buyers, sellers, and owners of property be knowledgeable about the properties they have an interest in or own, and, making buying and selling decisions. My comments have been oriented around that assumption.
Why bang out national, regional, and other non-local interest and employment rates, number of sales, number of properties on the market, average selling prices, and all other statistics, and, pundit’s narratives? The local real estate action is what is cogent; the rest is “Fark”.
Taking your example, if I were looking to buy or sell a condominium in Boston, Brookline, Cambridge, …, the condominium activity on the Northshore, let alone New England or the whole country, wouldn’t be important or of interest to me. Buyers and sellers – not information wonks, only really care about what is happening in the areas where they have an interest in buying, selling, or where they live.
I read your very first report that was titled “Lies, Damned Lies and Statistics”. Hopefully you will have many new subscribers over time, but many will be new to residential real estate, and not have read it.
So, back to my previous comment and question, shouldn’t ? an important caveat preceding every residential real estate blog, whose goal is to channel meaningful real estate information to buyers, sellers, and owners of residential real estate be something like: “residential real estate is a local phenomenon. For making your best residential real estate decisions, look to the critical indices and information derived from your local market’s activity.”
As always, looking f0rward to your response.
Very best, Jody
Good morning, Andrew.
Given your blog will most likely have a continued stream of new followers wanting to learn about real estate in general, as well as what is happening in their marketplaces, a suggestion to help them understand it all is to preface all your entries with this important concept (not necessarily in these exact words).
Valid data on residential real estate trends & values (the market) is almost entirely LOCAL. National, regional, and even neighboring communities’ statistics are mostly meaningless! Besides “what’s inside your wallet”, it’s what’s going on in your community, and maybe even just your neighborhood, that is cogent..
What do you think?
Thank you for your continued efforts and hard work.
Jody
Jody: there are many factors in a home buying decision. I believe the decision often starts with the macro, big picture: where is the economy headed, what’s likely to happen to mortgage rates, what are my personal job prospects. The next stage is: what are the needs of my family: more bedrooms, a safe community, good schools. And then finally: where in the community or communities that I have selected do I want to live, where are the best values.
I do not share your opinion that data beyond the immediate community is meaningless. As an example, I have drawn attention to the weak sales this year at the upper end on the North Shore. Were I just to look at these in isolation I would not know that sales elsewhere – in Boston, Brookline, Cambridge, Newton, Wellesley and Weston – were robust, enabling me to pose the question: has something happened to make the North Shore less attractive, or is this just a timing issue?
Thanks as always for your challenging and stimulating comments!
Andrew:
Rarely have I seen any of my comments in your “recent comments” link. Purely an estimate, but I think out of 8-10 comments, I’ve seen maybe 2.
How come? I hope it isn’t because I have frequently disagreed with some of your findings, beliefs, and theories.
I would suspect a blogger would want to present all comments, to create a forum that encourages as much open dialog as possible.
What’s up?
Vb, Jody
Jody: I checked and found that I had approved 8 comments from you. I interpreted some as personal messages and did not post those. I always enjoy your comments: keep them coming!
So, as I have been saying since about my 3rd year in a 28 plus year residential real estate career, the plus or minus errors’ function of estimated real estate statistics make them pretty much useless.
Unless margins of error are disclosed, the real estate statistics of the government, businesses, and pundits are non-truths by way of omission. Fibbers do use statistics to support their self-serving motivations.
And, those in the know, or those that are just smart, realize that residential real estate trends, & values (the market) are almost entirely LOCAL. National, regional, and even neighboring communities statistics be hooied! Besides “what’s inside your wallet”, it’s what’s going on in your community and and maybe ever your neighborhood.
Consumers would be much better served if that principle was the beginning and ending sentence in all residential real estate 101 courses and books.
But, if that were the mantra, governments wouldn’t have “good news” to employ as often as possible; and, pundits” abilities to make a living, and, bloggers need to shoot the breeze, pontificate, and be present would be exponentially diminished.
Wouldn’t that be WONDERFUL!
I agree that blind quoting of statistics as “facts” is misleading, which is why my very first report was titled “Lies, Damned Lies and Statistics”.
The fault mostly lies with those who repeat numbers without being able to interpret them. I try to interpret numbers, point out those that are relevant and those that are not, and use data to demonstrate trends and to try to make homeowners better informed about what is happening.