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HOUSING MARKET AN EXAMPLE OF SLIPPERY STATISTICS

SHARE HOUSING MARKET AN EXAMPLE OF SLIPPERY STATISTICS

While statistics have a chiseled exactness suggesting hard truth, savvy members of this information age know it isn't always so, whether the subject is real estate, insurance or economics.

They recognize, for example, that numbers may be even more misleading than words and are subject to manipulation, twists and torture in a manner beyond what such mere linguists as Shakespeare could do with words.Sometimes the intent can be to deceive, sometimes not. Often the numbers are clear to the eye and equally so to the mind, but the mind chooses to be deceived. Sometimes, just a bit of probing reveals the truth.

As in this example:

Since the mid-1980s, sections of the country have had depressed housing markets, marked by repeated lowering of asking prices and prolonged periods between listings and sales.

At the same time, the popular statistics on housing sales may continue to indicate price increases. Your own observations tell you that many prices are lower. The statistics continue to show price increases.

Is it you, or is it the statistics?

There are a couple of elements in the explanation, the first being that asking prices are indeed being cut, but sometimes the cuts only bring the selling price back to where it was a couple of years before.

Those high asking prices are understandable, at least in terms of human behavior. Only reluctantly do sellers adjust to newer market forces. They live a bit in the past and ask for the extreme prices of the past.

Even when they do adjust to the new reality, some selling prices remain higher than they were several years before, or even one year before - despite the cuts. But that's only one part of the explanation.

Glenn Crellin of the National Association of Realtors explains:

A slow market means there are fewer ready, willing and able buyers in the market, but those who do remain active want both a good home and a good deal. Quite often, the better deal is in the larger home.

Larger homes cost more, of course, but the buyer who is active in a slow market is often highly motivated, a real buyer rather than a looker.

"It's human nature," says Crellin. "If they can afford the larger home, most families will opt to spend a few extra dollars now to get closer to their dream house rather than save a little and be dissatisfied."

To illustrate: The median-priced, two-bedroom home in Boston was $200 less in the first quarter of 1990 than it was in 1989; the median-priced three-bedroom home was $2,200 less; the median-priced larger home was $200 less.

However, the median of all homes sold in the Boston metropolitan area was $1,000 more. The reason: The composition of home sales changed. The market share held by four-bedroom homes soared to 39 percent from 34.6 percent.

As a result, the median-priced home in metropolitan Boston rose, while actual prices in all categories fell.

Ultimately, says Crellin, "this means that users of statistics must periodically review what the statistics measure."

How true, whether you're reading about economic numbers in the newspaper, listening to a life insurance salesman extol the merits of a policy, or trying to get a measure of the housing market.