"Statistically Redundant Statistics"

I've been led to believe that Albert Einstein was a pretty smart fellow. We picture him with disheveled hair, glasses on his nose, tweed jacket, corn cob pipe, and a definite "wild professor" look... the kind of guy that would be tough to have a normal conversation with... (my apology to Sister Anthony Louise, my high school English teacher, for ending that sentence with a preposition...) I'm thinking, however, that Albert was probably "very, very sneaky," to quote the butler in the classic film, "Mr. Deeds." Why? Because he looked and played the nutty professor role, BUT he said stuff like this: "Things should be made as simple as possible, but not simpler." You'da thunk that quote was from Yogi Berra, himself.

And everyone has heard that "Figures Lie... and Liars Figure," thanks to Mark Twain. I'm picturing "The Comedy Duo of Einstein & Twain" on "Saturday Night Live," as they throw out their one-liners and say, "Bada Bing," to the sounds of canned laughter. The point here, of course, is that both were spot-on with their observations. In my last post to this blog, "The Real Estate Wild Card," 5/11/07, I threw out some stats... and drew some conclusions about the coming months. What I'm saying here is, never accept statistics at face value, without some explanation of the broader context. Like an onion, these facts and figures come shrouded in layers. Sometimes the real meaning is in the space between the layers.

My numbers tend to make local sellers (especially those who bought most recently) cry. Want to feel better? In once invincible Orange County, CA, it's gotten downright silly in some zip codes. How about zip 92663, Newport Beach... the median price (the mid-point, with half less expensive and half more... not to be confused with the average price) has plunged 44.2% recently... down to a dismal $910,000. "Poor baby," you say sarcastically, but that's down from $1,630,824. Their price drop... is about 4x our median sales price. Their sister zip 92660 only dropped the median from $2,007,978 down to $1,510,000... a mere 24.8%.

Here's some local confusion for you... to show you how a slice of numbers, extracted without regard to context, can paint a picture different from reality...

This is a comparison of the month of March, 2005 to March, 2007:

* Zip 32136 - March 2005: 10 sales - Median price: $321,250 - 52 days avg. on the market.

March 2007: 4 sales - Median price: $226,250 - 60 days to sale.

* Zip 32137 - March 2005: 96 sales - Median: $222,450 - 84 days to sale.

March 2007: 54 sales - Median: $263,500 - 142 days to sale.

*Zip 32164 - March 2005: 113 sales - Median: $187,000 - 73 days to sale.

March 2007: 59 sales - Median: $204,000 - 139 days to sale.

If you took these at face value, you'd conclude that some zips are seeing an escalation in price. The sample sizes, however, are too small to conclude this. On the other hand, you can say, with some assurance, that there are about 50% fewer sales and it's taking about twice as long to get to closing. All I'm saying is, "Be careful." If you had two guys, one 6'9", 145lbs., and the other 5'3", 295lbs., this would not be the correct sample, from which to derive height and weight statistics for men.