Clearly, the lobbyist made an error with decimal points — a car at that speed covers approximately 81 feet per second, not nearly 810 feet — but that’s an easy enough mistake to make. Of greater concern is that although common sense tells us that a car traveling at normal speed doesn’t move that far in one second, the lobbyist goes the extra step of translating his numerical result (“807 feet”) into something easily visualized (three football fields set end to end) — without blinking at the absurdity of his conclusion.
MATH MIX-UPS The press that covers the housing market is far from immune to innumeracy. William Apgar, senior scholar at the Joint Center for Housing Studies at Harvard University, says that there has been “an overstatement of the decline in home prices.” For example, when journalists see sale prices for houses dropping, they may automatically assume that the homes are losing value. What is often actually happening, Apgar says, is that “during periods of economic slowdown, there’s a tendency for high-end homes to not sell as rapidly as starter and lower-end homes,” so sellers of high-end homes pull their houses off the market.
Why the confusion? Apgar explains that media outlets can get this data from two sources: the National Association of Realtors (NAR), or Freddie Mac and Fannie Mae. The latter is called a “repeat sales index,” which tracks the estimated sales price of every house sold, adjusting for different levels of quality and value. The NAR data doesn’t make those adjustments.
When lower-priced homes that stay listed get sold for lower dollar amounts, someone looking at the NAR data might think homes are losing value. “But explaining the difference doesn’t make good copy,” Apgar says.
Steffens notes that the current news climate may be partially to blame. “Americans want to consume news in short bits,” she says. However, the issues surrounding the housing market are more suited to a “long documentary film.” It’s hard to hold the audience’s attention long enough to paint the entire picture.
Paulos stops well short of accusing journalists of fabricating stories, but says “there is a tendency to shape a story and to fall victim to confirmation bias” — citing statistics that support one argument while ignoring those that don’t. Holden says he more commonly sees this practice from columnists, rather than reporters.
INCOMPLETE PICTURE Steffens points out that one of the challenges business journalists face is that they are writing for separate and different audiences. Compared to investors, who already understand the complicated interplay between home values and stock prices, “the consumer audience needs a little more context. But the media who write for the more serious investor don’t always put it in the proper context for the average consumer.”
The result can be far-reaching. “In almost every case, readers don’t question anything unless it involves them directly and they know it’s wrong,” Holden says. Paulos says that the misinformed reader is prone to “bad personal decisions, particularly about risk.”
Apgar characterizes it as something of a self-fulfilling prophecy. “[There’s a tendency to] overstate the pessimism,” he says. Referring to the current state of the market, he concedes that it “wouldn’t be too smart to count on your house building up as much equity as it did in the [recent] past.” However, “the ‘woe is me, the housing market is tanking’ attitude can reinforce negative psychology that leads people to not spend money. That has a real negative effect.”