Wednesday, December 31, 2008

Data Trap: Big Percentage Increases in Small Numbers

The Big Picture headline is "Home Sales Plunge". Existing sales in November were down 10.6% over November 2007. Bullet points are:

• Existing home sales were down 10.6% from November 2007, and off 8.6% from October 2008 (October sales were also revised downwards); Single family sales fell to the lowest since ‘97.

• Sales were for 4.49 million annualized — about 440k less than expected; This is the lowest level since the 1999, when the NAR added in Condos and Coops;

Here is the math, converting to a monthly interval:


How important a change is that? Well, in the 2nd quarter of 2008 there were roughly 75,715,000 owner occupied housing units in the US, so the change represents 0.06% of the occupied housing stock. Let’s look at it another way. In 2000 the Census identified 25,375 places (roughly, cities and towns, a more exact definition here). If two homeowners in each place decided last month to hold off from selling their homes, that would more than account for the difference. Yes, some of those places are very small, but on the other hand, New York City, Los Angeles, Chicago, and Houston probably had more than two such homeowners.

When people talk about percentage changes, make sure you understand the actual numbers involved and their relationship to the entire population.