Macroeconomics Role in the Housing Crisis – Part 2
July 30th, 2009 | Published in Housing Market
Tags: future value, housing forecast, neighborhood, real estate, real estate information, real estate investment
In part 1, we learned that necessary data to make good real estate investment decisions has been lacking. If we look deeper we can see the problem revealed.
Statistically the MSA’s (Metropolitan Statistical Area) with the largest populations have the largest errors. This only makes sense since you will find a greater diversity as a larger area is included. For example, the largest MSA is the New York Metro, which has over 14,000 Census Block Groups. The macroeconomic variable have a minimum 20% error and a maximum of 78% error, when comparing the metro median to the Census Block Group median, based on last quarter’s data.
Other top MSA’s have similar errors, with Phoenix having a 17% minimum and 55% maximum. You can expect a typical MSA or “market” data to have over a 17% error. This data is all summarized in my book and you can find out more at http://www.youtube.com/watch?v=P8Fc244ibZw
These gross estimates considering MSA data is a major contributor to the failure of macroeconomics in the real estate crisis. These data estimate truly have been shown to have no real meaning to anyone in real estate, other than to show some general trend, and now we can see that general trend is off by over 17%. There is more to consider in how macroeconomics actually caused the housing crisis, and I will be in my next posting.
