Home › Forums › Closed Forums › Buying and Selling RE › What the Median Does Not Tell You
- This topic has 5 replies, 4 voices, and was last updated 18 years, 2 months ago by carlislematthew.
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August 12, 2006 at 8:08 PM #7188August 12, 2006 at 9:58 PM #31822carlislematthewParticipant
So John Q Public will not know officially about the turnaround in the market for about 1-2 years after it has happened.
I can’t disagree with any of your analysis and commentary, but I’m not so sure about the particular quote above.
During the last couple of years, the NAR had an incentive to rely on the misleading median figure, as it kept the market and the speculation going as prices looked to be rising still. However, if/when your theory pans out (which I think it will, BTW) then the NAR may suddenly have a revelation! “Wait”, they’ll say, “the median is misleading, and this is why!”.
It will be in their interests to be able to demonstrate to the public that things are picking up and that “it’s a good time to buy”. The media just echos what they say anyway, and so I see no reason why they won’t do so this time. They’re in real-estate after all – they’re the EXPERTS!
I’m wondering if anyone who remembers the last SoCal real estate pop could help out here? I’m assuming that the recovery will probably be similar. What did the NAR say at the time? Was the median still going down while the recovery was actually in the early stages of the recovery?
August 12, 2006 at 10:10 PM #31824SD RealtorParticipantPS that was an EXCELLENT post.
August 13, 2006 at 11:53 AM #31834PeaceParticipantThank you again, Powayseller, for taking your time to educate us on this point. Great post and great illustration.
I think a similar phenomenon is what keeps the median income looking positive. Even IF salaries are increasing, the demands on incomes in the guise of benefits and other inescapable cost of living increases results in real wage loss. And the astronomical difference between the upper incomes vs what used to be the middle incomes is really skewing the median.
And this relates back to the housing affordability index. A $50,000+ salary a few years back was quite a bit different in actual net/disposable income than it does today.
August 13, 2006 at 4:46 PM #31843powaysellerParticipantInteresting point. I remember Thornberg talked about rising benefit costs of employers were taking away from wage increases. I had not considered that wages were also reduced on the employee’s side by higher insurance co-pays. As far as cost of living, that is reflected by using *real* per capita income. I believe per capita income is adjusted by inflation. Of course, I would argue that inflation is actually much higher than the offical CPI, so wages are indeed falling even if the *real* number is the same.
August 14, 2006 at 7:35 AM #31866carlislematthewParticipantI would argue that inflation is actually much higher than the offical CPI, so wages are indeed falling even if the *real* number is the same.
I agree, especially if you’re referring to the “core” CPI. Sure, energy prices are volatile, but over the last few years the trend has been relentlessly upwards.
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