Friday, April 17, 2009

Reference Check

The media tends to throw around percentage statistics without giving a point of reference. I myself have been guilty of this on occasion. But it makes a world of difference. Economist and analyst predictions of another 20% drop in prices can mean two very different things, depending on where you start from.

To give an example, I pulled Sacramento housing tracker data, from May 2006 and Feb of 2009....Depending on the percentile, we have seen anywhere from a 37% drop to a 57% drop.

Below that are two separate calculations, one is 20% off the 2006 number, and the other is 20% off the 2009 number. The difference between the results in all three cases is around 40k. Certainly nothing to sneeze at.

If I were the cynical type, I might suggest that they are leaving the reference point out on purpose, that way they can easily revise history depending on how things turn out.

1 comment:

Husmanen said...

Very interesting. I usually use from the current state of the market, and 20% sounds good, maybe a little conservative for the upper end though.

Nonetheless, it is still a lot of money.