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Thursday 29 May 2008

BBC trying to minimise the reports of house price falls

Evan Davis on the Toady programme either tried a bit of "voodo economics" or doesn't understand the relationship between 1 month and 3 month averages. Whilst interviewing a spokesman from the Nationwide building society whose latest monthly house price survey shows that prices fell by 2.5% during May, Evan Davis was at great pains to ask what the three month on three month price drop was as single month falls are a less reliable guide than that for longer periods. This is true but not the whole truth. Fionnuala Earley, the Nationwide's chief economist said that "The pace of house price falls accelerated in May as more weak economic news added to the gathering momentum of negative sentiment about the housing market." If house prices rose by 0.5% in month 1 were level in month 2 and fell by 0.5% in month 3 then the three month average would be around 0% but wouldn't that be misleading as the trend is definitely downwards.

In fact the Nationwide showed a House Price fall of 0.3% in January, 0.5% in February, 0.6% in March, 1.1% in April and 2.5% in May. Now do you think that the figure that is more indicative of the extent of the house price fall is a three month average or the latest month's figure? I wonder what Evan Davis thinks and why the
BBC are so keen to minimise the reporting of house price falls.

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