Last week the Fed’s US Flow of Funds Accounts report was published, and according to that report, US Homeowner’s had the lowest percentage of equity in their homes since that data was collected. Obviously this information was received with open-arms by the majority of Real Estate blogs which are fueled by the pervasive negativity surrounding the Real Estate Industry. But new news suggests that things aren’t actually as bad as they seem.
What was wrong with the Fed report? Well, apparently their survey doesn’t take into account those homeowner’s who have completely-paid-off their mortgages! The article which I heard about here, is based off of a survey done by the Consumer Finance Monthly research group at Ohio State University. According to their data, homeowner’s have closer to 70% equity in their homes which is much better than the originally reported 47.9% by the Fed.
While skeptics will point to the rather small scale survey that was done by Ohio State, the fact that true Home Owners (those people not owing a dime) aren’t even considered in the Fed report, is horribly misleading. Certainly adding that 40% of the population who owns their home outright (in this study) would skew the results in a much more favorable light.
Much like popular weight loss supplements that point to the thousands of people who lose weight using their product, statistics can be used to paint very different pictures. In the end, it is important to have a healthy skepticism of statistics, and the skeptics themselves.
Tags: Statistics
