Jack of All Trades Markets, Master of None?
Next time you read a banner headline predicting homes prices — like the one on the cover of the Sept. 10 Barron’s (above) — I suggest you ask three questions: 1) “who says?”; 2) “where?”, i.e., which market(s) are they talking about?; and 3) “over what time frame?”
In the case of the Barron’s piece, the answers are:
1. Ingo Winzer, president of Local Market Monitor (Ingo who??).
Sorry, after a decade in the housing industry, I’ve never heard of either of ’em.
2. That 7% is a blended forecast for all 317 U.S. metropolitan statistical areas.
Neat trick, that — I don’t know of anyone who can forecast a single market with any accuracy.
Even that overstates things, because a metro area like the Twin Cities actually consists of something like 100 discrete neighborhoods, each with their own attributes, inventory, and market dynamics.
If that’s true of a metro area with roughly 3 million people, imagine how meaningless blanket market predictions are for cities like New York, Los Angeles, or Chicago.
See also, “Risk of Bad Statistics: 99.7%.”
3. It turns out that Mr. Winzner’s “up 7%” forecast is “over the next three years (beginning July 1, 2012).”
Umm . . . doesn’t that make the forecasted annual gain actually 2.33%? (undoubtedly the time frame most people would assume without reading to the end of the article).
Just asking . . .
P.S.: Regular readers of this blog know that certain kinds of Twin Cities homes — for example, updated ones in move-in condition that appeal to first-time Buyers (below $250k or so locally) — are likely up 10% just in the last six months.
