My second semester college stats professor had this posted over his desk:
A statistician can have his head in an oven and his feet in ice, and he will say that on the average he feels fine.
Despite the fact that on multiple occasions I wanted to put either his head or mine in an oven, the guy really did teach me a great deal about the power, both good and bad, of statistics.
Now there is no way that six credit hours of statistics makes one an expert. Nor does sitting in meeting after meeting listening to semiconductor engineers drone on about F-tests and kurtosis. Been there, done that, made the charts. (Fair warning, don’t click those links without a bottle of aspirin handy.)
But having a little exposure to statistics does help one sift through the daunting pile of real estate stats that are published on a regular basis out there on the world wide web. Some real estate data analysis is very well done, some is not good but harmless in the grand scheme of things, and some is just flat out wrong.
Lately there seems to be a resurgence in the not good to bad category of real estate statistical analysis. I ran across a chart similar to this a couple of days ago:
What is this chart trying to tell us? The text said that it shows “units sold” in Phoenix, and that the upward trend was “happy news”. OK, I’ll buy that generally speaking, increased sales are a good thing.
But what does this chart really show us?
Absolutely nothing. Conspicuously missing is the Y-axis (vertical) scale. If you want to change the visual impact of a line chart, adjust the scale. Without a scale, we have no clue as to whether this chart means anything. Did sales go up by 10 units or 10,000? Isn’t that knowledge just a wee bit important if you are going to try to draw any conclusions from this data set?
Sadly, this chart (well, not THIS chart, but THIS one) wasn’t done by an individual who simply doesn’t know better. The chart I saw (but can’t copy without permission) was produced by REality, a company that claims to be “the leading provider of real estate market intelligence in North America” (an interesting statement given I’ve never heard of them — wonder if they have any data to support that claim?).
Business Week blows it too
The well-regarded publication Business Week provided an interesting example today of statistical analysis gone bad. In this brief article, BW tells us that traffic to certain markets on Realtor.com has increased and, “What this tells you is that a lot of people are starting to bottom-fish in these markets”.
Really?
Maybe that’s true, maybe not. To take one statistic — increased traffic — and conclude that means something in particular is quite the leap of faith. Traffic to this blog has increased dramatically this year, does that make it safe to say the Phoenix real estate market is booming?
What the BW article fails to explore, completely, are alternatives to why traffic may have increased on Realtor.com. Could it be due to a site redesign (which R.com went through), increased advertising in those markets by either local agents or R.com, a change in searcher demographics, a change in Google’s algorithms, or some weird shift in the space-time nexus? Who knows, all are plausible (well, maybe not the nexus thing, I pretty much made that one up).
“So what is the point Jay?” a bored and weary reader is likely saying right about now.
The point is, very few real estate agents (myself included) are well versed in statistics. Dare I say, neither are most main-stream media writers. Apparently neither is North America’s leading provider of real estate market intelligence. And you know what? The typical person looking for information about real estate is probably not all that familiar with statistical analysis either, though I have no statistics to prove that.
As a real estate agent building charts and tables filled with stats, keep in mind that conclusions you draw based on statistics may, or may not, be accurate. Do you really understand the difference between average, mean and median home price? Do your readers? Do you want to make predictions and draw conclusions from data you don’t really understand.
As a real estate “consumer”, be careful letting other people interpret data for you. You can’t believe everything you read on the Internet — unless it’s on this blog of course, he says dripping with sarcasm. In fact, it’s probably safe to assume the conclusion someone reaches from their “statistical analysis” is nothing more than their opinion that is loosely based on some data set. There is certainly nothing wrong with expressing an opinion, just be aware that’s what it is — an opinion. Do your due diligence, seek out varying opinions and analysis before reaching your own conclusions.
Hat tip to Ines at AgentGenius for the BW link.
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
The stat professor that my brother and I had at college said "Torture statistics and they will confess to anything". You make a great point that we need to be careful how things are reported and make sure that when media outlets, such as newspapers, come up with stats that we challenge or support them as necessary on our blogs and to make sure to report our own stats so consumers have a choice.
Ooooh Boy. This hits home.
Recently, the Orange County Register posted an article entitled, 'O.C. Homebuying Slump Ends After 33 Months'. They based this on DataQuick's report that sales are up 17% from a year ago. Seems like a bit of a leap to me.
The number of sales may have increased in some price points, but I don't think we can immediately draw the dramatic conclusion that this is the end of the OC real estate market slump. An analysis of the kinds of sales would say a lot – low price points, distress sales, investors, first time buyers. Instead it ignores these details and the tight financial market, the stagnant movement over $750,000, and ongoing influx of distress inventory.
But, it made for a great headline and agents have been running it around in their marketing for a good 10 days. Sad.
Jay, you have no idea how mad I got when I read that article – to say it is irresponsible is not even close to the truth. As real estate bloggers we go out of our way to give correct statistics and to prove our numbers over and over and then we see a journalist from none other than BusinessWeek just throw it out there to see who bites – who's bottom fishing now? (Statistics was my least favorite subject btw)
Jay and Ines..I have heard the same tired argument from realtors forever. It seems no stat, survey or study is EVER correct or supported. Doesn't it get old after a while trying to knock down just about any data that does not set well with you?
Ines..not sure why it upset you..we operate in a seriously impacted marketplace here in South florida. Most..if not many, of the sales are distressed in some form or another.
You wrote" As real estate bloggers we go out of our way to give correct statistics"…really??? News to me. Most in the RE blogosphere don't want to face the harsh realities of the market and look at things with rose colored glasses.
I think Jay is way off base here and in reality it doesn't matter…the botom line is most real estate agents are relying on outdated methodology, want to remain "listers" and are not prepared to seize the opportunities that this data unequivocally shows. In fact, this BW story isn't even news to many we speak and deal with. It is expected. It's what usually happens next.
Instead of spending time applauding the denigration of the article, perhaps some agents would be better suited to learn how to capture and convert the increase of traffic and to understand the economic basis for these so-called botom feeders to be surfacing.
Then perhaps there would be casue for celebration as agents would actually be closing deals.
But hey..wahtever.
it's late..sorry for the typos
You're right on, Jay. I wrote a series of posts earlier this year trying to explain how badly the mainstream media mis-uses statistical references..
Real Estate Statistics in the Media
@ Ines – I totally agree. My reputation is on the line with every post, so I go out of my way to make sure my numbers are accurate, and I explain where they come from and why I chose those numbers. (Not to say I'm perfect, but it's not for lack of effort…)
@ Barry – this post has nothing to do with marketing and who's taking advantage of the current market conditions. The fact is that statistics are quoted in just about every news-broadcast and magazine article which references real estate, but those statistics are RARELY explained in context. Throwing a number out there without reference points can be vey misleading.
Can't help to take the bait here – but Barry's comment, "Most in the RE blogosphere don't want to face the harsh realities of the market and look at things with rose colored glasses," I find off base. So many of the people I read in the 'blogosphere' are challenging the media that is spoon fed to the consumer. Heck, I see the agents that are regurgitating the OC article in all kinds of advertising mediums, however it's those in the blogosphere that are questioning it and asking the consumer to look at it in greater depth. Isn't that the very point being made here?
Barry – I've supported plenty of stats here in the past, and will in the future when the conclusions the authors draw are reasonable.
There is *no way* that graph displays anything meaningful. No way. You argument on this one is weak Barry. That graph comes from a site called "HappyNews" — it supposedly provides data of a good/recovering market. If, as you said, it gets "old after a while trying to knock down just about any data that does not set well with you?" why would I be knocking "Happy News"?
Because it's wrong, plain and simple.
As for the BusinessWeek article, explain to me how the author makes the jump from "increased traffic at Realtor.com" to "people are starting to bottom fish in these markets". Maybe they had more data they didn't share (which would fall squarely under lousy reporting in addition to lousy analysis), but from what they printed, they had no basis for that conclusion.
I will pick apart data and conclusions that are in error. I don't care if is is "supportive" of realtors or not.
You said, realtors ". . .are not prepared to seize the opportunities that this data unequivocally shows"
Explain to my little realtor pea-brain exactly what this data unequivocally shows. I'm all ears.
Barry, I think you missed the point all together. This is not about whether the journalist is right or wrong, it's about how irresponsible he is by making assumptions.
Go ahead and change it around to horrible Realtors not wanting to face the truth and how the reality of the real estate market is about foreclosures and short sales.
It's still not the point – that article is baseless. That's like me telling you that you are an investor because you suck at fishing – absolutely absurd.
Great post Jay I agree 100% Stats can actually be made to say almost anything you want them to say.
Jay,
Excellent observations. I agree, the graph is useless.
There are two sayings I learned about statistics. The first applies highly to politicians, but is by no means exclusive to them. It is that "Figures never lie, but liers always figure."
The second was that approximately 78% of all statistics are made up on the spot. (By the way, that is made up.)
Anytime I see a statistics or some other "research" that "proves" something, I instinctly want to see the research that supports the conclusion. When you are in school and you write a paper you are expected to document and provide your sources. Too often these days we see lots of pontification without any evidence to support it.
Ok, so you say that the sales have increased. So what. Where is your evidence? Show me the raw data so that I can personally research it and confirm that your conclusion makes sense. If your methodology is sound then your conclusion will be supported by the evidence.
Increasing sales volume proves only one thing. More homes are being sold. What the graph probably did not show was that while the sales volume was increasing, the prices were declining and the number of properties entering the market was also increasing. That leads to a lower probability of any one individual propert being sold. That doesn't sound like "happy news" to me.
Jay..ok..I'll play along..you asked "are not prepared to seize the opportunities that this data unequivocally shows”
I am not quite sure why i am explaining this to "real Estate professionals"..but you asked…
Well…it does not seem that any of you disagree with the search volume stats..after all..they did come from the NAR after all so if you don't believe those numbers then we are having a useless argument.
Assuming you do accept the search volumes stats..then it does not take a brain surgeon or rocket scientist to make some reasonable correlation that those areas with the most search volumes also happen to be some of the areas hardest hit by the foreclosure epidemic.
Is that just some crazy coincidence? I mean with all of the MSA's in the country, those with the highest numbers of distressed properties ALSO happen to be the most searched.
Now I am neither the brain surgeon nor the rocket scientist but I am a reasonably thinking individual and I think there is more than a coincidence here.
Let's say I was looking to buy a house …oh it just so happens that I am..whaddayaknow…and I know some other people who are looking to buy homes. I, and others I know want to make sure we can buy the best house at the best price and get the absolute best deal that I can.
So…I am searching for those properties that make the most economic sense for me. So in my search for that great deal…where might I search?
Well, I hear that you can get a great deal on something called a bank owned home or maybe I can get one of those short sale thingies as I hear they go for bargains (if I can find someone who actually knows what they are doing that is).
So if I am looking for a great deal..a bargain…where might I look…hmmmm how about looking where the fish are! No pun intended..well maybe…
I would be looking to see if I can find my gold in those areas where gold is likely to be. Since I live in South Florida and I work in South Florida where would I find such a deal. Palm Beach…naw..little pricey. Jupiter Isalnd..naw even more out of my range. How about Tallahassee..naw..no one wants to live in Tallahassee and besides..I hate the Seminoles.
Then all of a sudden it hits me. I think they are going through a bit of a foreclosure crisis in South Florida…what a dummy! Is that where I should be searching…OF COURSE!!!!!
Then Is earch and I can't believe the relative smorgasboard of reo's and distressed properties down here. It's a veritable feast..so I tell otherws and then they search and then I go to meetings and they search and then I see bus tours and they search and soon there are tons of people searching for bottom dollar bargain properties in South florida. Whoddathunk!
So then I call my friends in Stockton and ask them if they have gotten in on this bonanza..and they say of course..and then I call Fort Myers and they say they have been in it for months and then Vegas and they laugh…
Ok Jay and Ines…yes this has been tongue in cheek but for realtors to not see these opportunities and understand that it is much more than a coincidence is tantamount to ineptitude.
Ok, maybe that's a little strong..maybe the clients some realtors serve don't look for bargains. Maybe some of the clients they serve want top priced, I'll pay anything prices to live somewhere..maybe so.
But c'mon guys..call it what you want. Bottom feeders, bargain hunters, idiots..insert term here…people are searching becasue they want to find deals and if people are searching then a good number are buying.
How do I know this…becasue they are calling us big time..they are emailing us big time we have offers coming in by the day..and although this has been one really long comment I am sorry that some would rather debate the merit of statistics instead of jumping into the game and actually seizing the opportunites..the ABUNDANT opportunities that are available and exist as a result of the increased interest in these areas.
Business Week was right on. The numbers do indicate increased activity and who cares what he calls those who are searching!
I kind of like the term bottom fishing. It actually has kept my boat quite full. It's not a term of denigration. It actually means that I and others like me recognize when it's time to pull the trigger.
Here's a hint that many..many..many..realtors missed. And if they understood then this conversation would not be occuring.
Bottom fishing ="Buying At The Right Price"!
Barry –
First of all, the numbers didn't come from the NAR, they came from Realtor.com (which is NOT the NAR).
But that's neither here nor there, just a little evidence that you either 1) aren't paying full attention; 2) don't understand the relationship between the NAR and R.com; 3) just wanted to throw "NAR" into you comment; 4) don't think I understand the relationship between the two; or 5) God only knows what.
I never, never said I disagreed with the numbers Barry. I also said BW's conclusion may be right.
The point that seems to escape you is that someone at BW took ONE statistic, and drew a very broad conclusion from it.
That is a combination of poor reporting, and poor statistical data analysis. THAT is the point I tried to make Barry. That Realtors AND consumers need to engage their brains and not just blindly believe whatever they read.
I never said buyers aren't coming back, never said they aren't looking for deals, never said just about anything you're talking about.
You write, "yes this has been tongue in cheek but for realtors to not see these opportunities and understand that it is much more than a coincidence is tantamount to ineptitude."
Barry, you have NO IDEA what kind of agent I am. We've never met in person, I've spent what 15 minutes on your show, and we've exchanged comments. You may know a little about me, but you clearly don't know me or my business practices well enough to label me as inept. You are not a client of mine, you don't live in this market, and you obviously don't read this blog often. If you want to stereotype all Realtors and lump as all into a group of blithering idiots, go right ahead.
"How do I know this…becasue they are calling us big time..they are emailing us big time we have offers coming in by the day.."
Good for you Barry. And unless you have my phone tapped, and are hacking into my internet connection, once again you have NO IDEA how often my phone rings or people contact me. You have NO IDEA how many leads I capture, how many deals I close nor what my clients think of me.
Yet you have the gall to call me inept?
I have a lot of respect for what you've done with your radio show Barry. I don't agree with a lot of what you write, but I'm not going to go on your show and call you inept. That is an utterly classless move in my opinion Barry. Typical from what I've seen from you and I'm sorry I fell for the bait.
By the way, you seem to have completely missed discussing the graph I posted. You know, the one that is part of the data that "unequivocally shows" whatever point it is you're trying to make.
For the record, I've got no problem with people "bottom fishing", buying at the right price, bargain hunting, or any other term. I sell real estate, I'm rather fond of people that buy it. Maybe I'm inept in someone's eyes, but I'm not stupid.
I do have a problem with people using lame statistical analysis to jump to conclusions that may or may not be correct. That was the entire point in this post.
Jay..I respect you as well but you just did what you say chris Did..you came to a baseless conclusion.
I wrote.."for realtors to not see these opportunities and understand that it is much more than a coincidence is tantamount to ineptitude."
I never said that Jay Thompson or any specific individual was inept. It does not say that nor would I say that.
No way I am lumping "ALL" agents in any category. We know and speak to some very bright and successful agents all the time. That rallying cry is quite tiresome as it seems to try and point a finger at an interloper and accuse them (me) of being a realtor-racist, which I clearly am not. I do however have no problem pointing out that some realtors are quite fallible. A rather obvious and undeniable fact that does not seem to resonate well with some in the re blogosphere.
By now, you must know that what I try to champion is to have a more efficient and professional real estate industry. I know you are a top dawg…no finger was pointed at you specifically.
By the way…the search data…the stuff that is the subject of all of this…is emblazoned with the realtor.com logo and is copyrighted by the NAR (© 1995-2008 NATIONAL ASSOCIATION OF REALTORS)
Which incidentally has been quoted by CNN, MSNBC and a host of other media outlets INCLUDING Inman News…guess we all got it wrong or don't know the inner relationship by and between realtor.com and realtor.org..as if that matters one infintessimal iota to anyone outside the re blogosphere.
The NAR put their stamp of approval on the data, and it was published. for all to read.
You think anyone other than some few realtors objecting to these stats cares about the relationship by and between the NAR and Realtor.com..No..we don't!
In any event, I apologize if you took my comment personally, it was not at all intended to be personal.
Fair enough Barry. Thanks for the clarification.
Yes, there are inept Realtors. Lots of them. Said so myself many times on this very blog. Sadly, there are inept people in ALL walks of life.
As for the NAR and R.com, I've also had plenty to say about both of them. Most of it was not what either group would call positive. Both of those organizations leave much to be desired.
Glad that ended somewhat amicably 🙂
Jay, this is one reason many folks like me turn to blogs when an article comes out. Nowadays, I nearly dismiss any article I read by anything “mainstream” unless it allows a comment section or is being linked by some aggregating site (digg,reddit, a more popular blog with lots of comments, etc).
The main reason for that is the one problem with graphs and statistics, as you get at, is CONTEXT.
Good example are the numbers for the AZ market. We’ve seen folks like Jay Butler use Month over Month numbers or Year over Year with little regard for consistency and more focus on selling the message that we’re not in trouble economically. Or the numbers will use the number of sales ignoring the number of listings, or the number of sales ignoring cancellations and expireds, etc.
To add on to one of your previous posts as well, regarding the quality of agents out there, and the fear of admitting we’re in a troubled market…
As one of your commenters pointed out (and I was busy so I couldn’t respond), even if it’s not a “good” time to buy or sell, a quality agent like yourself will attract those that still need to buy or sell regardless, and are prepared to weather the storm. A good agent makes sure these buyers/sellers are truly understanding the market and if things look good, closes the deal and will earn their return business.
The one quality that an experienced agent will bring to the table is that they can help truly interpret the graph or statistic that a potential client is looking at, and add context to the situation. Graphs are impersonal and can only, at best, roughly describe the myriad of factors which will impact that specific person in that specific situation.
I guess that makes you the imaginary Z-axis 🙂
I have been watching some of the graphs coming out as well. I have seen some rather broad conclusions draw. For the realtor numbers there could be a lot of different explanations. For one with less realtors in hard hit market the traffic for realtor.com could be going up due to increased competition. Or there could be a lot of people simply looking. I have been looking at prices in hard hit markets on realtor.com just to see what is going up but I have a 0% chance of buying. I just hear that houses in detroit are selling for 20k and want to see if its true. Im not saying those are the reasons. But I kind of cringe when I see conclusions drawn from data where the data could have multiple explanations.
Finally something new for me to learn and I am already subscribed. You can contact me if you need to. 😀