Rule #8: Statistics lie. Newspapers love to report on statistics. Read between the lines. Make sure the sample size is large enough to have meaning. Make sure the statistic itself has meaning. Statistics rarely tell the whole story. Sales volume may be down. Prices might be up. Last month might be good. Last year might be bad. Comparing this month to last month or this month to this month last year is not useful. If house prices rose by 30% over the previous month, what does this mean? Nothing. Averages are a terrible metric to measure house prices. The type of home that is sold in a given month strongly influences the outcome. For instance, if a lot of luxury homes are sold one month, then the average price of homes will go up, even if the the number of homes sold was down. Look to long-term trends.
If you’d like to reserve a free copy of my upcoming book – 365 Rules about Real Estate, please email me here.