Sunday, August 26, 2007

The Housing Depression is not over yet - Part III

The headline used by the mass media, burdened with an insatiable need to oversimplify everything they touch:

New-home sales rise 2.8% to 870,000 pace in July

Reason number 3 you should ignore the headline - Standard Deviation.

The range given for the data collected in the report is (+/-12.0%). In previous releases it has ranged as high as (+/-13.0%). The government itself admits that since the range encompasses zero then it is uncertain whether there was an increase or decrease during the month.

This raises the question that if the data is so unreliable and subject to revisions, why pay any attention to it except on an annual or even longer basis.

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