Last week, a mainstream newspaper published an article with a wild claim that turned out to be highly misleading. According to this article, there was a “strange surge in refinancing” despite sky-high mortgage rates, and refinances had increased 13% relative to the week before. This article contained a lot of important-looking numbers and expert speculation about the sudden increase in refinances. Now, I go absolutely wild for plausible-looking stats, so I was almost taken in. However, I still could not wrap my mind around why there would be a massive increase in refis that week, since refi rates were increasing slowly the entire month and are historically high. Were people just so over those trashy, cheap refis, and wanting something more luxurious? This seemed odd, so I sought out other articles for help.
I finally discovered that the article was mistaken in saying that the Mortgage Bankers Association’s Refinance Index is “seasonally adjusted.” In fact, this index is not seasonally adjusted, so it did not account for the fact that the previous week included Labor Day weekend. If you look at the actual MBA Refinance Index, the week of Labor Day experienced a massive decrease in refinances, and then bounced back the next week to completely average levels. So it wasn’t a “strange surge in refinancing” the week after Labor Day, it was that Labor Day week involved a massive decrease in refinancing that was completely not strange, since it was a holiday.
As someone who loves jumping to conclusions, I can understand how this happened. However, this is a good reminder of how easy it can be to say anything you want with statistics. If I wanted to write an insane article about how homes are much more affordable now, I could easily cite the latest housing statistics showing that between 2022 and 2023, homes selling above final list price decreased by a massive 30%. If I immediately shut off my brain and stopped doing research, I could write that “bidding wars are over” and “the housing market has finally cooled down.” However, these claims and numbers are absolutely bogus without context. The average mortgage rate increased massively between 2022 and 2023, automatically making the majority of homes far more expensive in 2023. Additionally, home prices rose 3%. Thus, it is difficult to argue that homes are more affordable now.
Most of us have a tendency to assume that numbers are objective and exist outside of human interpretation. One major problem with this philosophy is that it’s impossible to experience a number that hasn’t been filtered through a human perspective, since numbers are human constructs that we all use to describe the world around us. In fact, it’s not possible to experience anything at all that hasn’t been filtered through a human interpretation, whether it’s your own or someone else’s. I’m not saying that numbers are meaningless, but it’s important to remember that statistics and figures don’t have much meaning without layers and layers of context. As someone who loves quick stats and snap judgments, this can be frustrating.
As real estate agents, we are constantly asked for our opinions on price, interest rate predictions, and other statistics. We are in a unique position of having to understand national financial housing trends and data, while putting a local and personal context to these statistics to help our clients. The ability to put a story and interpretation to statistics and financial trends is an essential skill in this profession. After all, most of the seemingly dry numbers and data we deal with in real estate are really just attempts to explain human psychology, and predict how humans are going to behave with their money and housing choices.
https://www.redfin.com/news/housing-market-update-pending-sales-down-mortgage-rates-high/
https://ycharts.com/indicators/30_year_mortgage_rate
https://themortgagereports.com/61853/30-year-mortgage-rates-chart
https://tradingeconomics.com/united-states/mba-mortgage-refinance-index#calendar-table
https://www.cnbc.com/2023/09/20/weekly-mortgage-demand-rises-driven-by-a-strange-surge-in-refinancing.html#:~:text=Weekly%20mortgage%20demand%20increases%2C%20driven%20by%20a%20strange%20surge%20in%20refinancing,-Published%20Wed%2C%20Sep&text=Applications%20to%20refinance%20a%20home,same%20week%20one%20year%20ago.
Real Estate is Crashing! It’s Also Booming! What Do Statistics Really Mean?
