Comments Off on New Home Sales : How The Newspaper Headlines Mislead You

New Home Sales : How The Newspaper Headlines Mislead You


Newspaper headlines rarely tell the full story and today's papers provide a terrific exampleNewspaper headlines rarely tell the full story and today’s papers provide a terrific example.

From the Baltimore Sun (and others):

New-home sales lowest since 1991
8.5% March decline exceeds forecasts; prices also tumble

As always, there’s more to the story than the headline.

The Census Bureau reported a 8.5 percent decline in New Home Sales last month, but in the “fine print” of the report, the Census Bureau cites a margin of error of 16.1 percent.

By including a margin of error, the Census Bureau is acknowledging that the “headline number” is not precise and that the actual change in New Home Sales data lies somewhere between the values -24.6% and +7.6%.

Notice that the range of possible reading includes positive numbers.

This means that New Home Sales could have just as easily shown growth in March — if only the Census Bureau had interviewed a different set of home builders.

The Census Bureau acknowledges this possibility, adding that it “does not have sufficient statistical evidence to conclude that the actual change is different from zero.” The data, therefore, is worthless.

The housing market may be strong or the housing market may be weak. Most likely, it is both of these things. It all depends on your street in your neighborhood because all of real estate is local.

Either way, look deeper than the headlines. They’re a good source of information, but the real analysis requires a deeper look.

New Residential Sales In March 2008
April 24, 2008

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