As traders/investors, it is our obligation to get the facts, to understand the facts, and to then apply what we know as factual to our trading decisions. We cannot rely on the words of others, as the words of others, unless documented, can be biased, manipulative, or just plain wrong. So, today when I was reading, I came across the following sentence in still another dark-day analysis of the economy.
… from unemployment to the worst home sales figures on record to the steady decline in the price of homes.
It is the last phrase that caught my eye — steady decline in the price of homes. Now, I get it that the economy is slowing down, and I get it that the housing market is, at best, struggling, but what I don’t get it is how writers in magazines of repute can mistake the facts. In this case, the facts are as I have reprinted below in the chart. The overall fact is this – housing prices on average are not in steady decline. The up or down price movement depends on which area of the country one is viewing, and the meaning of the price movement is relative to the time frame in which the comparison is made. So, look at the chart below and decide if the phrase the writer used is correct in the broadest sense.
National Association of REALTORS®
Total Sales: Single-Family, Apartment Condos and Co-ops
|
State |
2007 |
2008 |
2009 |
2009.II |
2009.III |
2009.IV |
2010.I r |
2010.II p |
Qtr. |
Yr. |
(Seasonally Adjusted Annual Rate, 000s) ( % Change)
|
United States |
5,652 |
4,913 |
5,156 |
4,780 |
5,280 |
5,970 |
5,140 |
5,607 |
9.1% |
17.3% |
|
Northeast |
1,006 |
849 |
868 |
793 |
917 |
1,033 |
853 |
980 |
14.9% |
23.6% |
|
Midwest |
1,327 |
1,129 |
1,163 |
1,073 |
1,210 |
1,363 |
1,133 |
1,297 |
14.5% |
20.9% |
|
South |
2,235 |
1,865 |
1,914 |
1,767 |
1,957 |
2,217 |
1,893 |
2,100 |
10.9% |
18.8% |
|
West |
1,084 |
1,070 |
1,211 |
1,143 |
1,190 |
1,360 |
1,263 |
1,230 |
-2.6% |
7.6% |
Overall, in the U.S. prices have actually increased in quarter over quarter in all areas but the West, and year over year in all areas, if you believe the National Association of realtors, that is. True, the last three quarters are skewed because of the housing credit that has come and gone, but that doesn’t change the reality of the numbers overall, nor does it mean one can say broadly that housing prices are in steady decline.
As to the statement “worst home sales figures on record,” well, that statement is statistically true in the context of the drop from the “best home sales figures on record,” however, in the context of comparing apples to apples, the statement is not nearly as ominous as the words imply. In fact, I would argue that what we are experiencing in the housing market today is good and necessary in order to get back on track to a strong and vibrant housing market. In trading, we call this consolidation, and it is the necessary step before the market can begin a steady climb higher.
So, always get the facts, gain an understanding, and then make your investment/trading decisions on what you know to be factually correct, not the language writers use to foster a bias, manipulate your thinking, or to simply put forth mistaken information. By the way, have a relaxing weekend …
Trade in the day; invest in your life …
