Misleading Wall Street Journal story that hides how good of an investment a home is
Posted by John Reed on
WSJ's reporter in charge of bad-mouthing homes as an investment, Nicole Friedman, is having another big celebration of a tiny price movement. Front page line graph showing a steep plummet from the top of the graph to the bottom.
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Whew! What a horrible investment performance a home has been!
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Uh, you need to read the description of what the graph depicts. You should probably write this down to decode it. This is a graph of the S&P CoreLogic Case-Shiller National Home Price Index showing the first year-over-year price decline in 11 years in April.
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How much was that decline? Wait for it.
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.2%.
Is there an actual home price in this blockbuster article about home prices? Just one in the last paragraph: the National Association of Realtors®—not Core-Logic—median existing national home price—$396,100.
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What is .2% of that?
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$792.20 Probably less than the margin of error of the survey.
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Previously Nicole could not find a year-over-year price decline so she was ballyhooing MONTH-OVER-MONTH price declines. I criticized that noting homes are not held for one month then sold. They are also rarely held for one year then sold either. More like five years minimum because of the high transaction costs.
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What is the actual headline that Friedman and the Journal are trying to hide from you?
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A. A one-month cessation of 11 years of appreciation in an asset price is not worthy of a headline.
B. A proper graph would be of the home prices themselves not of the % Increase in an index. That proper graph would show an ever-climbing, albeit at different rates, home price.
.
A proper graph would not show monthly numbers; annual would be the shortest increment worth looking at regarding the value of SUCH a long-term asset. Here is a proper graph.
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https://fred.stlouisfed.org/series/MSPUS
.
A more informative graph would show not only home prices but also the prices of the investments the Journal is biased IN FAVOR OF: the S&P 500 and bonds. That would reveal that the home performed far better than stocks or bonds.
.
https://www.google.com/search?q=s%26p+500+chart&source=hp&ei=422cZM7DGNXQkPIPxcW-uAo&iflsig=AOEireoAAAAAZJx78xSqIMOxkZFA-ZUqE5110LX6fqkw&oq=S%26P+500+&gs_lcp=Cgdnd3Mtd2l6EAEYATILCAAQgAQQsQMQgwEyCwgAEIAEELEDEIMBMgsIABCABBCxAxCDATILCAAQgAQQsQMQgwEyCwgAEIAEELEDEIMBMggIABCABBCxAzIICAAQgAQQsQMyCwgAEIAEELEDEIMBMgsIABCABBCxAxCDATIRCC4QgAQQsQMQgwEQxwEQ0QM6EQguEIMBEMcBELEDENEDEIAEOgsILhCABBDHARDRAzoFCAAQgAQ6CwguEIAEELEDEIMBOgUILhCABDoLCAAQigUQsQMQgwE6EAgAEIAEELEDEIMBEEYQ-gFQAFizMWCNT2gBcAB4AIABoQGIAakHkgEDNC41mAEAoAEB&sclient=gws-wiz
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https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
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Furthermore, even that graph would understate the performance of homes as investments. My 2021 book about the American Principal Residence as an investment lists about two dozen fabulous advantages that principal residences get over other assets, like stocks or bonds or even rental houses. They do not get: $250,000 per spouse capital gains tax exclusion, homestead bankruptcy exemptions, 30-year, fixed-rate mortgages with no prepayment penalty, NIMBYIsm, etc.
.
https://johntreed.com/collections/real-estate-investment/products/an-american-principal-residence-is-the-most-advantaged-investment-on-earth-maximize-yours
.
Figures don't lie, but liars can graph.
.
Whew! What a horrible investment performance a home has been!
.
Uh, you need to read the description of what the graph depicts. You should probably write this down to decode it. This is a graph of the S&P CoreLogic Case-Shiller National Home Price Index showing the first year-over-year price decline in 11 years in April.
.
How much was that decline? Wait for it.
.
.2%.
Is there an actual home price in this blockbuster article about home prices? Just one in the last paragraph: the National Association of Realtors®—not Core-Logic—median existing national home price—$396,100.
.
What is .2% of that?
.
$792.20 Probably less than the margin of error of the survey.
.
Previously Nicole could not find a year-over-year price decline so she was ballyhooing MONTH-OVER-MONTH price declines. I criticized that noting homes are not held for one month then sold. They are also rarely held for one year then sold either. More like five years minimum because of the high transaction costs.
.
What is the actual headline that Friedman and the Journal are trying to hide from you?
.
A. A one-month cessation of 11 years of appreciation in an asset price is not worthy of a headline.
B. A proper graph would be of the home prices themselves not of the % Increase in an index. That proper graph would show an ever-climbing, albeit at different rates, home price.
.
A proper graph would not show monthly numbers; annual would be the shortest increment worth looking at regarding the value of SUCH a long-term asset. Here is a proper graph.
.
https://fred.stlouisfed.org/series/MSPUS
.
A more informative graph would show not only home prices but also the prices of the investments the Journal is biased IN FAVOR OF: the S&P 500 and bonds. That would reveal that the home performed far better than stocks or bonds.
.
https://www.google.com/search?q=s%26p+500+chart&source=hp&ei=422cZM7DGNXQkPIPxcW-uAo&iflsig=AOEireoAAAAAZJx78xSqIMOxkZFA-ZUqE5110LX6fqkw&oq=S%26P+500+&gs_lcp=Cgdnd3Mtd2l6EAEYATILCAAQgAQQsQMQgwEyCwgAEIAEELEDEIMBMgsIABCABBCxAxCDATILCAAQgAQQsQMQgwEyCwgAEIAEELEDEIMBMggIABCABBCxAzIICAAQgAQQsQMyCwgAEIAEELEDEIMBMgsIABCABBCxAxCDATIRCC4QgAQQsQMQgwEQxwEQ0QM6EQguEIMBEMcBELEDENEDEIAEOgsILhCABBDHARDRAzoFCAAQgAQ6CwguEIAEELEDEIMBOgUILhCABDoLCAAQigUQsQMQgwE6EAgAEIAEELEDEIMBEEYQ-gFQAFizMWCNT2gBcAB4AIABoQGIAakHkgEDNC41mAEAoAEB&sclient=gws-wiz
.
https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
.
Furthermore, even that graph would understate the performance of homes as investments. My 2021 book about the American Principal Residence as an investment lists about two dozen fabulous advantages that principal residences get over other assets, like stocks or bonds or even rental houses. They do not get: $250,000 per spouse capital gains tax exclusion, homestead bankruptcy exemptions, 30-year, fixed-rate mortgages with no prepayment penalty, NIMBYIsm, etc.
.
https://johntreed.com/collections/real-estate-investment/products/an-american-principal-residence-is-the-most-advantaged-investment-on-earth-maximize-yours
.
Figures don't lie, but liars can graph.
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