The Gift and The Curse of Statistics

Last week a number of media outlets had a glowing article about how the real estate market is turning the corner as pending sales were up, dramatically, year over year. First reaction is, “that is awesome news.” On further inspection the news is still good but not to the extent I would have hoped. Question is, why is this a curse?

When you look at year over year statistics there is the assumption that the data you are analyzing has the same constraints. The reason this has come up recently with the new numbers released by the NWMLS is that constraints have changed in the way “pending” properties are reported. Last year at this time, the status pending meant that the property had likely passed its inspection and was on its way to closing. Late last year the status of “Active STI” (subject to inspection) was changed to “Pending Inspection.” While this change seems harmless, it can have a drastic affect on statistics. Now included in the pending numbers for April of 2009 are houses that still could fail their inspection and go back to active. In 2008 if a property was marked pending there was an presumption that the subject property had already passed (if applicable) its inspection and that was no longer a contingency. What this means for year over year statistics is that the pending numbers are artificially inflated because a number of the properties that are included in the pending figures could fail their inspection, reducing the total number of pending numbers for that month. But where is the gift?

The beauty of statistics is that for every way to make stats look bad, there is a way to make them look good. How can inflated statistics be a good for me as a realtor? Energy! What happened to all those fence sitters when they saw those numbers? They jumped, “maybe I’ve waited too long and missed my opportunity.” Your B buyers just became A buyers over, what could be said to be slightly skewed but true statistics. Now there are agents in the offices with smiles on their faces working diligently and we can thank that to statistics and the media.

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