Saturday, October 24, 2009

The Truth Behind the Data

The NAR is not a government agency. It's the National Association of Realtors - a trade group. Their entire mission objective is to ensure that the real estate market is healthy, and thus they, well, they basically lie about data to try to depict a rosier situation than actually exists.

The recent September home sales data contained a massive seasonal adjustment which resulted in the NAR trumpeting a "SURGE" in home sales. I'll let Barry Ritholtz take it from here:

This year, the fall was 5.3%. Hmmm, that was highly aberrational — I wonder why? We (and the NAR) know the reason: Due to ZIRP and the soon to be expiring 1st time home buyers $8,000 Tax credit, the drop was minor – much smaller than it usually is when we go from August to September in EHS.
The tax credit very likely extended the selling season by at least a month. It pulled some sales forward, and perhaps created other sales where there might not have been.
But the seasonal adjustment does not know that; The math PRESUMES THE AUGUST/SEPTEMBER DECLINE IS OF TYPICAL MAGNITUDE OF THE PRIOR 10 YEARS.
That creates a misleading — lets even say false — appearance when the seasonally adjustments are performed.
Again, someone trying NOT to mislead will inform the reader of that directly. But calling it a SURGE? Only if you are innumerate — or a liar. Any honest statistician who worked on these numbers KNOWS that the seasonal adjustment was going to create a big bump, a misleading number, based on the historical data.
And thats the whole point. The NAR knows that calling this a surge will mislead readers, but they report the data — DOWN 5.3% — as a “SURGE.” What else might their goal be BUT TO MISLEAD THE PUBLIC?
I refuse to facilitate that. And I will call anyone an unprofessional liar, a distorter of the data who claims this was surge. THIS MEANS YOU, NAR !
The folks who are unfamiliar with seasonal adjustments will get caught in the scam. This was not an ordinary seasonal adjustment — it was highly misrepresentative.
I know better. And now, you know better. Unfortunately, most folks do not.


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