What do you think? Statistics Lie???

So by now I am sure you have heard the good news.  Housing was up less than 1% month on month in the latest report. 

Oh wait when you factor in seasonality price declines are accelerating (by one account over 4%) and cemeting the double dip camp.

What is an average person to do?  First you need to realize that all statistics lie and can be spun to tell a story if you sprinkle them with enough sugar.

The average person needs to watch their market and see what is going on at the transaction level.  

The following is happening in my market and I suspect it is happening across the nation at differnt intervals and scale.

1) Banks sold the Cheap REO's and Sub Prime junk first as that was the first wave of defaults. A lot of this went out 12 months ago.

 2) Defaults, Foreclosures and REO's are working their way up the income stack.  The move up market and the high end are just now starting to be hit hard in my market.  We are talking 500K homes going for the low 200's.

So lets do some simple math and see why I think housing may post  some more garbage increases.  For simplicity we are going to assume 10 transactions occured in both periods. The first period is 12 months ago and the second is this month.

12 Months ago in my market the only thing selling was the cheap REO's and they were going to cash rich investors who paid bottom dollar.  So out of 10 completed deals we had 7 Cheap REO's at 40K each, we had 2 Move up buyers who bought early and paid 300K each and then one wealthy cash buyer who paid 750K for a mansion.  Total purchases = 1,630,000 or 163K Average Purchase.

Let's fast forward 12 months and most of the cheap REO's are gone and now the Move up market and high end gets hit.  We have 3 40K purchases, we have 4 Move up Buyers who pay 250K and we have 3 high end deals at 600K each. Total Purchase = 2,920,000 or 292K average purchase.

So if you believe these BS numbers one would think housing has turned around as the Average Price is up 79%!!!! Wow what a turn around!!!! Can you believe it??? Or should you believe it?? NO

But wait what really happened.

Cheap REO's are still be sold at steep discounts, the move up market lost more than 15% and the high end lost 20% so how can this be spun as good news???  Answer Statistics!!!!

Do your homework, learn your market and don't let the media confuse you.

Things are not getting better in housing as we are still working through issues across the income levels.

Good investing