A Healthy Skepticism of Data

I'm something of a numbers nerd, so to talk poorly of data is not the easiest thing for me to do. Indeed, especially in the real estate world, I would be the first to line up in favor of math because it helps remove emotion from decision-making. Emotion is inherent to real estate buying and selling because it is a huge decision for most people, but it also has a tendency to keep people from making the wise decision.

So, this article is not designed to outright bash data but serve as a warning that blind acceptance of data can lead to the same mistakes being made as operating on pure emotion would.

Pick a website, news outlet, or social media channel that isn't covered on a daily basis with wide-sweeping headlines about this or that. They are designed, like any good marketing campaign, to elicit viewership and engagement. The problem is that once you get into the nuts and bolts of the issue at hand, you will find the underlying facts are not always the most pertinent to your particular situation. The same is true of real estate news and data.

"Housing Starts Up", "Housing Starts Down", "Prices Drop While Inventories Soar", "Home Prices Up Due to Low Inventory", "Case-Shiller Index Up", "Case-Shiller Index Drops", "Pending Home Sales Drop Sharply", "Pending Home Sales Highest in Years": all of these are news headlines from the past five years. All of them are also true. All of them are also false.

Real estate is inherently local. In the words of new marketing types, you might even call it "hyper-local". Location, location, location is a real estate mantra that remains true and likely always will. The problem with the headlines above is that they take a national study and make it appear like the headline is appropriate for the local area of the reader/viewer. More often than not, that's just not the case.

Let's assume, for a second, that I am a Realtor/home buyer/home seller in the Houston area. I see a news story saying how the Case-Shiller Index has predicted doom and gloom for the real estate industry/market. I decide not to renew my license/buy/sell based on the story. The Case-Shiller is the holy grail of market measurement after all, right? Except that it doesn't include Houston in its analysis at all. The hottest market in the country over the past two years and one that was impacted less than most by the downturn and it isn't included in the Index. The same goes with just about all of the studies that resulted in the headlines above. It takes a deeper look at the data behind the data to determine if it makes sense for you.

So, how do you figure what's right and what's a really good headline? Examine their data, look for your region/city and make a logical decision. Even better, consult with a local expert or multiple experts in the field and get their opinion. Call a local Realtor or your local real estate association and get their data. Don't blindly accept information from television/internet sources that don't explain how it affects you in particular.