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.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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