Of socks and men

The crisis in the banking system which culminated in Northern Rock’s near demise is now having a visible effect in the housing market. I was called yesterday by an estate agent who was keen to inform me that one of his properties had just been reduced in price by 13%. Also, a local estate agent has a shop window that now features a good number of properties with “New Price” emblazoned across them.
It is interesting watching this unfold as statistics are being mis-used in some fairly standard ways. The difference between descriptive and predictive statistics is a slightly subtle one that can be understood by understanding that just because prices have risen strongly over the last year does not imply that price rises will continue. The price is an indicator that lags behind a whole bunch of underlying factors and events, ephemeral consumer confidence being one of the most significant, that govern what people want to pay for a property.