Chapter 22 - 1. Statistics Are People, Too (Looking at the housing bust in more than just dollars a

Updated: Dec 19, 2021

Changes in the real estate market can be predicted not only through economic indicators or statistical information such as population inflow, but also through people's thoughts and actions. Today, I will write about how people's thoughts and actions shown in the book correlate with the real estate market.

The correlation between positive thinking about the economy and house price

According to a study by Gallup, an American research firm, there is a strong relationship between people's positive thoughts about the future economy and real estate prices. The graph below shows the correlation well.

At this point, many of you may think, "If house prices go up, you will naturally have positive thoughts that the economy will improve," while others will think, "Of course, as the economy improves, the number of home buyers will increase and house prices will rise." So which of the two is the cause, and which is the effect?

Research institutes have been researching that, but they have not been able to figure out which is the starting point and which is the result, people's outlook on the economy or real estate prices. That is, we do not know which of the two came first, such as the relation between chickens and eggs. If we uncover this part, it can be a better indicator for future real estate investment.

Percentage of smokers and the price of real estate

As the gra

ph above shows, the percentage of smokers is inversely proportion to the real estate price.

However, the causal relationship between the two is also not known which affects which.

(There is a part in the book that explains that people's blood pressure and cholesterol levels are also correlated with real estate prices, but I will omit that argument because the graphs shown in the book do not convince me.)

The degree of happiness and the size of the real estate bubble

A sudden rise in real estate prices is called a bubble. Oddly enough, the size of this bubble correlates strongly with how happy people are, or more precisely, the percentage of people who think "I'm not very happy" in the real estate market.

An organization called “General Social Survey” continuously surveyed and measured social changes in the United States from 2004 to 2010. The survey has the following three options to choose one: "I am not very happy", "I am quite happy", and "I am very happy". Zillow compared and analyzed the results of the survey and the relationship with the real estate market.

As a result, in Texas and Tennessee, where the proportion of respondents who answered, “I am not very happy,” is low, and this proportion did not change significantly during the y years of study, the fluctuations in house prices during the subprime mortgage crisis were not as large as in other regions.

On the other hand, in Phoenix, Arizona, and CA's downtown areas such as LA, Riverside, Sacramento, and Vallejo, the proportion of respondents who answered "I'm not very happy" reached 17% in 2004, then dropped to 9.3% in 2006, and again It has risen to close to 20%. House prices in these areas have risen sharply and fell sharply during the 7 years of study. See the bar graph below for a better understanding.

Isn’t this interesting?

In the next article, I will write about the influence of political orientation, sexual frequency, religion, etc. on the real estate market. If you have any questions, feel free to contact us.