How to Report on House Prices

Just for fun, today let’s play journalist and headline writer.Victorian House

Here are the morning’s facts that we have to work with: 1) For the month of July 2010, the Case-Shiller 20-City Home Price Index was up 0.6% and the 10-City was up 0.8%. 2) For the year to July, the indexes are up 3.2% and 4.1%, respectively. 3) House prices are now at the level they were in fall 2003, but are still about 50% higher than they were in January 2000.

Okay, so what’s the headline you would use for your story reporting this news? Here are some I think would be appropriate:

“July Brought More Modest House Price Increases”

“S&P Case-Shiller at Highest Level Since ‘08”

“House Prices Continue Recovery Despite Tax Credit Expiration”

Or, taking more of a big picture approach:

“With Dust Settling, House Prices Hold on to Half of Boom Gains”

Alas, this is why I am not a professional journalist. I just don’t know how to report the news properly. Actual headlines included:

Home Prices in U.S. Cooled in July After Tax Credit Expired (Bloomberg)

Home Prices Remain Stable Around Recent Lows (S&P press release)

To be fair, some outlets went with an admirable just-the-facts-ma’am approach. The AP chose Home Prices Rise 0.6 Percent in July from June, but it opened the report thusly:

A national gauge of home prices ticked up in July for the fourth straight month, but many cities are bracing for declines in the year ahead.

The price increases were fueled by now-expired homebuyer tax credits. With the peak buying season over, a record number of foreclosures, job concerns and weak demand from buyers are pushing prices down.

The (brief) story does not tell us which cities are bracing for declines, nor what steps a city might take to brace itself properly. Attributing July’s increase entirely to the homebuyer tax credit is a bit of a stretch, as it expired in April.

Foreclosures were up 4% in August over July, but they are down 5% from a year before. I guess “record number” could mean a lot of things in this context. More to the point, default notices, which start the foreclosure process, were down 1% in August from July and down a very considerable 30% from August 2009. It is fairly clear that the pipeline of foreclosures is shrinking, which is obviously good news for the house price outlook.

“Weak demand from buyers” is, to say the least, a speculative assessment. Less motivated sellers is just as plausible an explanation for the lower turnover we saw over the summer. And prices being pushed down is not merely speculative, it is contrary to the reported fact in the headline. Prices are up.

Or are they? Reuters headlined their report U.S. Home Prices Seen Stabilizing Without Tax Credit and led with:

Single-family home prices dipped in July, and are seen stabilizing near the lows without the homebuyer tax credit that ended in April, Standard & Poor’s/Case-Shiller home price indexes showed Tuesday.

A dispatch from some alternative universe perhaps? Not quite. Reuters decided, more or less uniquely, to use the seasonally adjusted version of the index, which indeed was down –0.1% in July for the 20-City version. (10-City was flat.)

I am philosophically opposed to seasonally adjusting asset price indices. We don’t adjust the S&P 500 level seasonally, do we? And I am not convinced there is a theoretical justification for seasonally adjusting house prices. Although the level of sales is quite seasonal, I do not think it follows that prices must be.

S&P appears to agree with me. Although they do publish seasonally adjusted numbers, they appear at the very end of their press release, almost as an appendix, with a note that the non-adjusted numbers are the standard “markets have followed and reported on.” The adjusted numbers are supplied “for analytical purposes.”

Even then, I am scratching my head over what Reuters could have meant by “stabilizing near the lows.” The seasonally adjusted 20-City index bottomed out in May ‘09. It is up 4.8% since then. I guess “near” is a relative term.

Again, my confusion serves as a reminder why I am not qualified to be a professional reporter or editor. Apparently, there exists an imperative to spin the house data as pessimistically as possible.

Not being in the club, so to speak, I do not know where this imperative comes from. Maybe the media is concerned about getting our hopes up. We’ve had so many disappointments lately, and it would be so sad if our little hearts got broken again.

Is it possible that this is some kind of political agenda? That the liberal types in the media want to make the case that the dysfunctional marketplace needs further intervention from the omnipotent government? Nah. That would be crazy.

Most likely, and I am just speculating from the outside here, the media is just trying to sex up the story. As great a relief as boring house prices are to nearly everybody else, it is bad for reporters. Monthly price increases (or decreases) measured in tenths of a percent and trends that point decidedly sideways are not good copy.

The troubling bit is that consumers, homeowners and potential homeowners, read these reports. They (very foolishly) rely on the media to tell them what is going on and why. A person misled into thinking that the home price horizon is darker than it really is might rush into selling his house or hold off on buying one. Both actions are likely to cause that individual economic harm. More to the point, it does not take a professional to see that if millions of people are so misled, then talking down the house price outlook becomes self-fulfilling.

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