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The Artificial Rise of Home Prices in the U.S.

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  • William Matz | | 05 Sep 2012, 03:05 PM Agree 0
    Median prices do NOT measure price movement; they only show where the middle of the market is. A recent Niche article had a good study by DataQuick that broke down a median "increase" by separating out the portion of the median increase that results just from a different product mix (which ranges from 0-100% of the increase) and the portion caused by actual price level increases. But, by itself, median changes cannot tell you anything about price movement.

    The article wisely notes that the heavy investor activity should cause caution about projecting any future trend.
  • John Lorson | | 05 Sep 2012, 04:19 PM Agree 0
    When politically dependant banks and government agencies withhold their inventory of foreclosed homes from the market in a concert of abuse, the result is a shrinking supply of homes in underwater cities and an artificial increase in housing prices. This is a planned event to show an artificially improving housing market during the political season. The political manipulation of the real estate market seems way to convenient. The reason America is suffering from the current real estate downturn can be traced directly to political intervention in the real estate market. It is time to shrink the size and scope of the central government.
  • Danny Speagle | | 10 Sep 2012, 11:37 AM Agree 0
    Mr. Matz,
    You would be correct if you were speaking of 'Mean', not 'Median'. Median is also known as Average. It, in fact, does tell us about price movements.
    But, if they were only reporting the Mean price, then we could not infer anything about price movement.
    People often confuse the three common statistical measurements of Mean, Median, and Mode.
  • Danny Speagle | | 10 Sep 2012, 12:03 PM Agree 0
    Mr. Lorson,
    I lived in one of the worst cities hit by the Mortgage Crisis. Denver. I saw many banks perform the practice that you speak of back during the Bush Administration and into the Obama Administration. I know that these banks where holding their own mortgages and not Mortgage Backed Securities. Ergo, There was no incentive for political pressure to be present. The pressure on these banks to act in this manner was already pointed out by you correctly. These banks were artificially pushing up the housing prices by removing some of the Supply. We all know about Supply and Demand. These banks were misbehaving, but there was nothing illegal by their actions unfortunately. That is what you get when Republicans killed the Glass-Steigall Act that put regulations on the Banking Industry. No Regulation means THEY DO WHATEVER THE HELL THEY WANT. So stop whining or support regulations.
  • William Matz | | 10 Sep 2012, 04:43 PM Agree 0
    Mr. Speagle,

    You have it backwards. The median is the midpoint of the market, and the median house is a different house each month, making any comparison apples to oranges. E.g., if 5 house sold in June(100, 120, 150, 180, and 250), the median would be 150 (mean is 160). If July had 5 sales (110, 130, 140, 190, and 280), the median would "drop" to 140, while the mean would increase to 170. So the media would often report that "prices fell 6%". Of course, those numbers tell us nothing about price movement because we need to see prices for COMPARABLES, which is what appraisers do.

    You are correct that the three types of average are mean median, and mode. But the median (and the subcategories of quartiles or deciles) are typically only of interest to real estate agents gauging where the market is.

    Finally, the effect of the repeal opf Glass-Steagall is widely misunderstood. Repeal was passed by a Republican Congress and signed by a Democratic President (bipartisanship?). However, Wall Street had been doing derivatives for years before, but through their U.K. affiliates. (Read Fool's Gold, by Gillian Tett for details.) As we have seen from the many hearings, the problem was not so much lack of regulation as it was failure (especially by the SEC) to enforce the regulations we had.
  • Joe Adamaitis | | 14 Sep 2012, 07:09 AM Agree 0
    Mr. Speagle with all due respect, you may want to fact-check your spin related to Glass Stegall (spelled correctly) as it was Bill Clinto in 1999 who repealed and signed the repeal. Further political action has alwasy been part of the Democrats agenda in housing as they speak out of two sides of their mouths. Barney Frank accuses the GOP whiole he singlehandedly led the charge against the GOP to reform Fannie Mae. Need I provide you his comments? It does not matter who is involved, but it needs to stop. Further, you will find that Realtors have a huge hand in escalating the plan of the banks by now raising home prices which are only truned down due the appraisal rules of using short-sales and foreclsoures. A vicious cycle to say the least.
  • Carol Johnson, Esq. | | 16 Sep 2012, 12:32 PM Agree 0
    Mr. Speagle,

    Actually, and this is a very common misunderstanding, Mr. Matz speaks the truth - 'Mean' is synonymous with 'Average', while 'Median' is the 'middle of the road', so to speak. Think of the medians on a highway which marks the center of the roadway.

    You are correct that people often confuse Mean, Median, and Mode, which you, yourself, have done here.
  • return of the phoenix | | 13 Dec 2012, 07:46 PM Agree 0
    I don't know Joe, realtors although 'agents' are not playing a huge hand as one might think. It is not that home prices are being raised but the combined illusion of currency devaluation, rising interest rates and stricter conditions on credit worthiness which have cut the pool of potential buyers from the market ... so that realtors and FSBOs simply can't cash in as with pre-2008 market values and are then 'forced under market' in many cases. The market no longer allows for price gouging. I'd say realtors are more or less just cogs in the wheel trying to feed families on commission. Vicious cycle with the foreclosures, which is true, and a sign of a slowing economy and rising unemployment figures.
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