Lies, lies and statistics


This month’s title reflects my concern about the plethora of contradictory trends and trajectories produced by various nationally based housing and lending indices. It would be foolish to accept statistics at face value – they are, after all, only an indication and can always be viewed two ways. To quote Aaron Levenstein: “Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital.”

Information is only good if it can be relied upon. That is not to say that the indices in themselves are inaccurate or have been slanted this way or that. It is just that there is a constant burbling with no overall governance on how statistics are come by. Besides, there are a great many of them, and they often appear to contradict each other. Therefore, instead of them being valuable tools to cross-check each other, they sometimes leave the reader bewildered.
 
Should you, for instance, choose to take on board the Halifax’s indications that house prices are moving up, when the CML have been stating in the same period that mortgage applications are at their lowest level ever? Simply on the basis of supply and demand, the longer-term claim that an increase in prices will be maintained cannot be true unless the deduction has been drawn from a very small number of unrepresentative transactions in a limited geographical area.
 

 

 

 
On occasions the media are inclined to skew the presentation of indices in order to find something positive or negative to report, according to circumstances, especially on slow news days.
 
What I am trying to say is that the broker does not have to use the selective evidence presented by the media when he or she is talking to clients. This evidence may turn out to be effectively meaningless hyperbole based on a set of national statistics which reflect the macro-economy rather than the micro-economy in which the broker or client may be living and trading. After all, their particular micro-economy may be that of the first-time buyer, the country-house owner or the executive in the capital, all of whom have different needs.
 
It is also far too easy for the broker to adopt statistics that may have been gathered from a recent bulletin, or from the national media, and to regurgitate them in newsletters or conversations to clients, rather than becoming a local expert in his own area or sector. 
 
The problems for the future are as follows:
 
 
·        People are currently repaying their debt at alarming speeds. Last month alone a billion pounds more was repaid than was borrowed. The problem with this is that, if future lending is to be based on retail deposits, where will the money come from to fund future lending?
·        There will be fewer clients due to increasing interest rates, which will affect affordability. There will also be fewer products and less funds available.
·        These factors have already had a dramatic impact on our industry and will continue to do so, resulting in fewer brokers. Those who remain will need to be more aware of local trends in order to gain the competitive advantage in their area, and to get access to the limited number of clients who qualify for borrowing.
With this in mind, I feel that I can offer some practical advice on the area of statistics. Rather than relying on national indices from hoojamiflop or thingummywotsit, why not become a local analyst? Watch price movements in your local area.
 
If your specific expertise lies in one field, then find out everything there is to know about market conditions, both ebbs and flows. Look to foster relationships with agents, solicitors and independent valuers. Ask them their opinion of where they feel things are going. You will be amazed at how receptive they can be, offering real insight and reducing the “us and them” barriers, sometimes just on the basis of a problem shared being a problem halved. This process will be helpful not only to brokers but to their clients, by informing them of local trends and pointing them in the direction of relevant professionals, who will also benefit.
 
It may also help you to establish real local connections of mutual benefit, and be able to share two-way advice and impressions of the local market. With the evidence of your own relationships and primary research, you can help your clients better understand the trends about relevant sectors of the marketplace, and make decisions accordingly.
 
So what is my message this month? Statistics can sometimes be dangerous if incorrectly interpreted, so use them at your peril. A good quotation to finish with is in the words of Andrew Lang, who cautions against being the type of person who “uses statistics as a drunken man uses lampposts – for support rather than for illumination.”