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Wednesday, November 17, 2010

Risk of Bad Statistics: 99.7%

That's One Awfully Clear Crystal Ball

Smart Money magazine is running a piece ("Fishing for Housing Bargains") that profiles six housing markets nationally that now appear to be attractively priced.

To support that claim, the article purports to calculate the "risk of price decline."

The risk ranges from 3.1% for Omaha, to 25.4% for San Antonio; according to the author(s), the risk of a price decline in Pittsburgh (pictured above) is 12.0%

All six markets may indeed be good values.

But the idea that Smart Money (or anyone else) can precisely calculate the downside risk -- to .1%, no less -- is a hoot.

Save the $4 cost of the magazine -- and the 10 minutes it'll take you to read the article.

P.S.: As I like to tell my clients who ask for market projections: 'if you tell me what interest rates, unemployment, GDP, and housing inventory are going to be . . . I'll give you a reliable local housing forecast.'

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