Sunday 21 September 2008

Fun with numbers (6)

"Plunge in house prices outstrips the crisis of the 1990s" blares The Independent.

A good start, but then they let themselves down with sloppy maths and logic:

The crash in house prices is now the worst ever in Britain. HBOS ... will publish figures next month showing that the decline from last year's peak now exceeds the fall during the 1990s. From the top of the market in May 1989 to the bottom in February 1992, the bank's seasonally adjusted index of prices fell by 13.1 per cent. That fall has already been exceeded since the market peaked last August. So a slide that took nearly four years in the last recession has been repeated in just 13 months – and shows no sign of stopping.

1. Using Nationwide figures, the nominal/non-inflation adjusted peak was Q31989 and the absolute bottom was Q51995 - that's over six years, not "nearly four years".

2. The nominal fall was 17%, not "13.1%". Anybody who quotes averages of averages to anything more accurate than one per cent is a fool anyway.

3. The inflation adjusted fall last time was 37%. The inflation adjusted fall so far must be about 18% - a fall of more than 13.1% nominal (from the article) plus 5% RPI inflation. So we're achieved - in one year - half as much as we did in the six years 1989 to 1995.

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