Three Housing Headines, Three Misleading Statements

As a consumer, it's very easy to be misled by newspaper headlines.  Today provided a great example, the third in a series of stories about housing.

"New-Home Sales in U.S. Fell 3.9% to 848,000 Pace in February"

This would normally be bad news except that the Margin of Error in the survey was 17.4%.  That means that the data read could have just as easily been -21.3% as it could have been +13.5%.

The Commerce Department doesn't try to hide this, either.  At the bottom of Page 1 of their report -- not obscured in the least bit -- it's written that there is insufficient "statistical evidence to conclude that the actual change is different from zero".

Because the Margin of Error exceeds the measurement, the data measured is worthless.  The headline could have read "13.5% Gain In New Home Sales" and that would have been "true", too.

(Author's Note: If you want to know more about how Margin of Error works, check Google and find an answer that suits you.  Or, just trust me on it.)

So, today's data is misleading.  But, did you see happen to see last Friday's headlines?

"Sales of Existing Homes Up 3.9% For The Biggest Monthly Gains In Three Years"

Missed in the headline (again) was that total inventory rose, too, by 5.9%, adding more supply to the market than for which there is demand.  More supply pushes prices down and -- voila! -- the median sale price was down 1.3% from February 2006.

The headline spins positive, but the real data is neutral.

And, because things always happen in threes, did you see last Monday?  This headline made it to your preferred news source, I am sure:

"9% Jump in New Home Construction". 

The headline was then followed by an article highlighting strength in the housing sector because more homes are being built. 

What was not in the article?  That the Housing Starts survey's Margin of Error was 10.2% and that rendered this data worthless, too.

Housing may be strong or housing may be weak.  But, most likely, housing is both of these things.  It all depends on your particular street because all real estate is local.  Either way, look deeper than the headlines -- there's always more to the story.