I’m sort of working my way around all the various rescue packages. Why do they all have to have fancy names and acronyms? TALF, TARP, Making Home Affordable, Making Work Pay. Argh! But that’s not today’s rant. Today’s stabby post about the way some of these programs and statistics are presented. The government likes to say things like, “This will save the average homeowner $1300 a year.” Or “Home prices have fallen 25%.” When you average numbers in that manner, you create unreasonable expectations for some and irritation for others because you can’t just average a number across $300 million people, 50 states, and multiple major metropolitan areas. Here’s why.
We Don’t Have a National Housing Market
Journalists and politicians like to report statistics for U.S. housing prices. However, as anyone who lives in the U.S. can tell you, we don’t have a national housing market. Frankly, we don’t even have state housing markets. We have regional markets, and even more local markets within a region. Here in the Los Angeles region, some areas have seen prices fall by more than 50%, while others are only starting to see prices decline. If one section of one state has such a wide discrepancy, how can you possibly even think about averaging those declines across the country?
Not only that, but home prices vary wildly, which makes those percentages mean very different things. A 10% decline in a $150,000 home is $15,000. A 10% decline in a $500,000 home is $50,000. That’s quite a difference.
Finally, the “Making Home Affordable” plan says that the average U.S. home value is $200,000. That’s a completely meaningless number when trying to calculate how much anyone stands to gain from the program. At $200,000, the average homeowner could see their home value stabilized by as much as $6,000. (We’ll pretend that sentence makes sense.) Does that mean someone with a $400,000 house could maintain $12,000 in value? It’s impossible to know, because this one number tells us nothing.
We Don’t Have a National Employment Pool
The U.S. unemployment rate is 8.1% today. In California, that number is over 10.1%. In Los Angeles, it’s 10.5%. All of those numbers are bad, but to average them together actually paints a better picture than the actual case in many places.
We Don’t Have a National Income
They also like to talk about how much various tax cuts will help the “average American.” They average U.S. incomes to work out those figures. But there’s no such thing as an average American income! This payroll tax reduction is supposedly worth $13 a week. Is that true whether you make $10 an hour or $150,000 a year?
I know that statistics can’t reasonably be presented for every American, but I do wish they’d stop making general statements based on bogus statistics. Just say what the program does and let us figure out what it means for us individually. When they make cite these general statistics, it only makes some people think they’ll got more than they will, and irritates other people for whom the “average” is too low to make a real difference.
And while they’re at it, they need to stop slapping acronyms and happy marketing titles on everything. We’re not stupid. Oh wait, I’m probably generalizing again.
