Posted by Jonathan J. Miller -Monday, January 9, 2012, 9:58 AM
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I’ve been outspoken about the misuse of seasonal adjustments in housing statistics. While they are not all bad and are favored by economists for their ability to smooth out a year’s worth of information so one can see where greater than normal changes stand out, there cause more harm than good when it comes to understanding housing.
The basic problem with seasonally adjusting the numbers are as follows:
- there is no standardized methodology or period for making the adjustments
- the adjustments are rarely disclosed
- they often adjust already adjusted numbers (i.e. annualizing NAR existing home sales)
- the reader often doesn’t understand what it is
- while it may be useful for analysis, the results often contradict current conditions
and most importantly…
- the adjustments become skewed shortly after a significant market change.
As discussed in this Fed research piece on “…seasonality gone awry”:
While seasonally adjusted data can be extremely helpful, they should be used with care. In particular, the statistical methods used for seasonal adjustment may generate misleading results when applied to data with structural breaks, where the underlying properties of the data change significantly during the period studied.
Case in point is the National Association of Realtor’s Pending Home Sales Index that has basically been a mess for the past 18 months after the expiration of the federal home buyer’s tax credit. The disparity between the indices. The NAR press releases sharply contradict the feeling on the street with agents, buyers and sellers, marginalizing the meaning of the report results.
- Cash Assets of Foreign Banks: An Example of Seasonal Adjustment Gone Awry [FRB NY]
- Pending Home Sales Index [NAR]
Posted by Jonathan J. Miller -Thursday, October 13, 2011, 5:17 PM
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Shouldn’t that self-help book be renamed…
Men are from Alaska
Women are from Mississipi
….or at least those are the states where each gender dominates the real estate market.
Trulia’s (crazy-interesting) Insights blog takes a look at men versus women (real estate agents) and patterns they show. In this battle of the sexes a state by state gender analysis was made for price difference and number of homes for sale using their Trulia Pro agent membership and a gender name analyzer to best guess who is what.
- Woman dominate the real estate agent profession with all 50 states having roughly 48% to 64% more female than male agents.
- After adjusting for the lopsided differences in gender, women tend to have more higher priced listings.
- After adjusting for the lopsided differences in gender, men have more total listings.
Curiously, no metrics were included about whether the toilet seat is kept up or down.
Posted by Jonathan J. Miller -Wednesday, June 29, 2011, 9:22 PM
Housing industry advocates couldn’t have scripted this any better. A down-on-its-luck, beaten-up fundamental US economic sector got its own very unique stimulus program today that came in the form of a credible poll that covered consumer views on homeownership.
This New York Times article and NYT/CBS News Poll results will be linked to by the hundreds of thousands and read by millions of homeowners, want to be homeowners and real estate professionals for the next few years providing the long neglected alternate view of actual real estate consumer sentiment, which shows very favorable results towards homeownership but with trepidation about the risk.
New York Times article: Despite Fears, Owning Home Retains Allure, Poll Shows
The NYT news alert I received summarized the key findings quite succinctly:
- Owning a house remains central to Americans’ sense of well-being, even as many doubt their home is a good investment in after a punishing recession.
- Nearly nine in 10 Americans say homeownership is an important part of the American dream, according to the latest New York Times/CBS News poll. And they are keen on making sure it stays that way, for themselves and everyone else.
- Support for helping people in financial distress over housing is higher than support for helping those without a job for many months.
View polling results document (housing portion starts on page 14, question 31)
In my view, the rising anti-homeownership mantra was best illustrated by Time Magazine’s 9/11/2010 cover story: The Case Against Homeownership.
The part that was left out or not understood was that the institution of homeownership has been baked into our culture since the 1920’s. The recent crisis was NOT about homeownership. It was really about the financial mechanism to mortgage it, the loss of regulatory oversight and blending of the investment and commercial banking worlds.
One side bar to the poll was similar to the “not in my backyard” argument concerning consumer culpability for some aspect of the systemic breakdown of the financial system and the shift of blame towards the banks.
Amid the swirl of recent disclosures about banks following improper and illegal procedures in pursuing foreclosures, 42 percent blame lenders, while 29 percent blame regulators.
When the question was asked in early 2008, as the crisis was still building, the numbers were reversed, with 40 percent blaming regulators and 28 percent blaming lenders.
Only a handful of respondents at either moment blamed the borrowers themselves for taking loans they could not afford.
Posted by Jonathan J. Miller -Wednesday, March 16, 2011, 11:06 AM
I read a great NYT Op-Ed article this weekend by David Brooks called “The New Humanism:
Reason, which is trustworthy, is separate from the emotions, which are suspect. Society progresses to the extent that reason can suppress the passions.
This has created a distortion in our culture. We emphasize things that are rational and conscious and are inarticulate about the processes down below. We are really good at talking about material things but bad at talking about emotion.
There has been a groundswell of this type of reasoning from the brokerage community as of late – I wrote about “Analysis Paralysis“
I asked the question – does it come down to “ignorance is bliss” versus “knowledge is power”?”
I was reminded of the Op-ed piece when I read Fred Peters’ interesting take in Warburg Blog post It’s Not All In Your Head which basically addresses the paradox.
I think he is saying that we can’t be too dependent on one or the other approach and like mortgage lending, the pendulum has swung too far. The brokerage community, coming from a gatekeeper legacy which extolls “It’s always a good time to buy” versus the blogosphere mantra, a la Felix Salmon/Reuters “It’s never a good time to buy.”
There are two approaches to buying a home like any other material item:
More after the jump…
Posted by Jonathan J. Miller -Monday, February 14, 2011, 9:18 AM
Last week I was invited to co-anchor a press briefing for Trulia (I’m an original advisory board member) with Co-founder Pete Flint (one of the nicest, smartest people I’ve ever met). He covered the survey results and I provided an overview of the state of housing in the US.
I addressed the fear and self-loathing housing discussion largely brought about by the expiration of the federal home buyers tax credit last spring. Far from being an apologist on the state of housing (we clearly have more pain in front of us), its more about the unintentional misdirection caused by relying on housing metrics that lag the market by as much as 5 months.
Their Harris Interactive poll results:
What we found this time around is that despite the nightmarish housing market, 70% of Americans still view owning a home as part of their personal American Dream. Moreover, we’re seeing positive signals for recovery from Millennials (young adults aged 18-34) and in the South & West.
American Dream Survey Q1 2011 [Trulia]
Listen to the press conference [iTunes]
Posted by Jonathan J. Miller -Thursday, October 28, 2010, 10:34 AM
A few months ago, I did an analysis by floor level of Manhattan co-ops and condos, which illustrated the market phenomenon of the missing 13th floor in Manhattan. Superstition played a strong a role in floor level delineation but that trend is fading. Older buildings are more likely to be missing the 13th floor than new ones.
Last weekend’s New York Times Real Estate section cover story by Vivian Toy “Sometimes, Lucky Numbers Add Up to Apartment Sales” revived my interest in the topic.
So then there’s this research paper…
In the very interesting Department of Economics, University of British Columbia October 2010 research paper “Superstition in the Housing Market” by Nicole M. Fortin, Andrew Hill and Jeff Huang, the impact of superstition was measured by the the last number of the street number in a property address.
When the Beijing Summer Olympics opened at 08:08:08 pm on the 8th day of the 8th month of
2008, it was shown to the world that the Chinese take the auspiciousness of the number “8”
seriously. In Las Vegas, where superstitious beliefs are rampant, many large casino-hotels (such
as MGM, Wynn and Palms Place) omit floor numbers 4, 14, 24, 34 and 40 to 49 because the
number “4” is considered unlucky in the Chinese tradition. This tetraphobia comes from the
fact that the pronunciation of the word for four is very similar to the word for death in Mandarin, Cantonese, and several Chinese dialects. On the other hand, the word for eight is phonetically similar to the word for prosperity or wealth.
Think “8″ not “4″.
Apparently my batting average is not very good in my own residences, but then again, I don’t believe that each housing market I have lived in since college has been composed of at least 18% Chinese buyers as defined in this research.
Roughly every other residence we’ve had since college suggests death. I’m glad my lucky number has always been “7.”
38 (wealth – we rented when first moved from NYC to CT, ironically owner was foreclosed and we had to move)
The paper is simply presented and clear. I especially love the the academic formula variable for “Chineseness” census tract variable denoted as “Ec” and the use of the word “tetraphobia”.
Here are some results:
We find that in neighborhoods where the percentage of Chinese residents exceeds the Greater
Vancouver average of 18 percent, houses with street numbers ending in “4” are sold at a 2.2
percent discount and those ending in “8” are sold with a 2.5 percent premium in comparison to
houses with street numbers ending in any other digits.
And several footnotes are especially interesting including:
David Phillips, George Liu, Kennon Kwok, Jason Jarvinen, Wei Zhang, and Ian Abramson ( 2001)
find that for Chinese Americans and Japanese Americans, the peak of mortality among chronic cardiac patients
occurs on the 4th of the month, a striking pattern not found among White Americans.
It sounds like one should never under estimate the power of superstition. After all, a key component of value is the perception of future worth as defined by market participants. After reading this paper, I now get the Feng Shui consultant marketing thing as a phenomenon — for non-believers, in a market with more buyers guided by a form of superstition, the goal for a seller should be to reduce purchaser obstacles in order to expand marketing exposure to get the highest price for their investment.
I still think “7″ is a pretty lucky but for some reason I’ve never lived in a house including my childhood that ended in “7″ that I recall. Maybe that’s why it’s my lucky number.
Posted by Jonathan J. Miller -Wednesday, September 29, 2010, 11:16 PM
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Someone was recommended to call our firm the other day to get an appraisal of their apartment.
My senior appraiser recapped the conversation as follows:
I just had the pleasure of speaking with [redact] and I do use that term loosely. He is not a very professional individual and I feel like we should not accept the assignment no matter who referred the work or fee.
Essentially, the highlights were:
- telling the appraiser how he would like the apartment appraised and which comps we can use.
- he doesn’t want a “piece of sh*t” appraisal done by some form filler using any comps that are not larger than his apartment.
- he wants only sales that are larger and no further east than [his location].
- he said we were going to send over the sales in advance which he would approve us to use.
Our appraiser maintained his composure and simply let the person do what they do best – rant.
We passed on the golden opportunity to work for this person. Who needs to work this badly, even in this economy? – and accept an assignment from a crackpot like this? Good grief.
Why can’t we all just get along?
Posted by Jonathan J. Miller -Tuesday, September 21, 2010, 9:20 AM
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Fastcodesign posted an interesting series of graphics on racial/ethnicity integration/segregation by Eric Fischer using Census data on 40 US cities.
Using U.S. Census data from 2000, he created a map where one dot equals 25 people. The dots are then color-coded based on race: White is pink; Black is blue; Hispanic is orange, and Asian is green.
The results for various cities are fascinating: Just like every city is different, every city is integrated (or segregated) in different ways.
New York City was described as:
There are ultra-dense areas of extreme racial concentration. But the sheer number of people in those areas means that the boundary areas become intensely rich areas of cross-cultural ferment.
The ferment is what makes New York City so great.
Race and ethnicity 40 City Set [Flickr]
Posted by Jonathan J. Miller -Saturday, September 4, 2010, 7:00 AM
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[via FlowingData] WNYC’s Brian Lehrer show asked their listeners to provide information about their move to or from New York City. Then they asked listeners to design to visually organize the data and the results were interesting and amazing.
Here are some other entries:
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Posted by Jonathan J. Miller -Tuesday, June 22, 2010, 12:03 PM
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In today’s WSJ there is a chart I made covering Manhattan absorption market wide by price segment – inspired by my monthly report series.
The article sort of suggests that condos are doing better than co-ops as a generalization, which isn’t quite correct or I am over analyzing the results. However, one thing is certain:
Absorption for lower-end condos and co-ops is being driven by conforming mortgage financing being more readily available than jumbo financing.
My takeaways from the chart are:
- Co-ops are taking longer to absorb than condos above $3M (not considering “shadow inventory” of new development.
- Co-op and condo absorption is generally on par with the 10 year 9.9 month average overall rate of absorption.
- Co-ops edge out condos (faster) below $1.5M
- Co-ops over $10M are significantly higher than condos but this segment is about 1% of all sales so the results are easily skewed.
- Lower priced property generally absorbs faster.
Absorption has greatly improved from last summer yet there is still a distinction in performance between the upper and lower end of the market.
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