"Housing Statistics Hit Rough Waters"

In the January 8-9th Wall Street Journal article with the above quoted headline, Carl Bialik is dead on with his analysis of the housing statistics that get thrown around .  I encourage you to read the full article but here are some highlights.  He first points out that only 2/3 of all homes have mortgages so if you hear that 22.5% of homes with mortgage have negative equity, which CoreLogic reported in December, that means that 15% of all homes in the U.S. were underwater.  He goes further to say that most are concentrated in a handful of states, Arizona, California, Florida, Michagan and Nevada.  These states combined for 31% of all mortgages nationwide but 53% of all underwater mortgages. 

In addition, 7% of that 22.5% are underwater by 10% or less.  That means that just under 9% of all homes nationwide are underwater by over 110%.  If you are not confused enough by now, there are many more homeowners with slightly positive equity than slightly negative equity so if the methodology for home valuations used by CoreLogic & Zillow are flawed or greatly inaccurate, more people are likely to be shoved into the negative equity bracket than positive.  CoreLogic claims its valuation estimate is within 10% of a sales price 55% to 75% of the time while Zillow claims it is within 10% almost half of the time. 

So what should the reader take from all of this?  There is clearly a bias to the negative in both the statistical methodology and the media at large.  Yes, this has been a crisis of epic proportions and devastating to many, but wallowing in the negative and refusing to acknowledge anything positive can only lead to more of the same.  Markets are simply a group psychology. (Read upcoming blog on markets)  Thankfully there are some lie Mr. Bialik who can bring some measure of sanity to the news cycle.