I was reading the NPR news blog over a cup of tea when I came across an article called Housing Starts Drop, But Building Permits Are Up. Housing starts generally refer to the new construction of privately-owned residential buildings. My gut reaction to the headline was merely a thought, what does all of this mean? As I read further I learned that there was a 5.8 percent drop in housing starts from February to March 2012. Bloomberg News reported that this unexpected drop leaves housing starts at a five-month low. Although both sources reported declining housing starts, based on a joint press release from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, they highlighted an increase (of 4.5 percent) in the number of building permits issued from February to March 2012. This statistic is certainly telling us something about the housing market but what are these economists and journalists really saying? Well, the increase in building permits is a proxy for new residential construction, so when there is an increase in permits, future construction is expected. Economists often use these statistics to project whether or not the housing market will expand or decline. In other words, these statistics are most often used to predict economic activity in the housing market. According to these articles, the development of new housing is on the decline even though permits for new privately-owned buildings have increased.
After reading this article I couldn’t help but think, have housing starts really dropped? How do we really know whether or not housing starts have increased or decreased? I clicked on the hyperlink that sent me directly to the press release and read the following:
“Privately-owned housing starts in March were at a seasonally adjusted annual rate of 654,000. This is 5.8 percent (±15.6%)* below the revised February estimate of 694,000, but is 10.3 percent (±14.6%)* above the March 2011 rate of 593,000. Single-family housing starts in March were at a rate of 462,000; this is 0.2 percent (±12.6%)* below the revised February figure of 463,000. The March rate for units in buildings with five units or more was 178,000.”
What is most interesting about this report are the asterisks. If you scroll down to the bottom of the report, you’ll find the corresponding asterisk under the explanatory notes section. These asterisks indicate that the 90% confidence interval includes zero, and that the Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero. Given these methodological considerations, unfortunately, we cannot determine whether or not there was an increase or decrease in housing starts from February to March 2012.
Why would Bloomberg and NPR’s news blog report these uncertain results with so much certainty? Did these economists carefully review the report with the methodological considerations in mind? Reflecting on these news articles reminded me of Joel Best’s book, More Damned Lies and Statistics: How Numbers Confuse Public Issues. Best argues that numbers are sometimes used for a particular agenda or misused to gain support for a cause. Media stories often highlight what he refers to as “scary numbers” to make society believe that a problem is severe and has serious implications. According to Best, this tendency to highlight these scary statistics often reflect the way that we notice social problems because they incite fear impelling people to feel vulnerable, as if they are personally impacted by a public issue. Once people feel as if their safety net is threatened, they are more likely to be in support of something being done about it. Perhaps, after reading these articles people will feel that the future of home ownership is bleak. Perhaps, the results of this report—as interpreted by the media—will influence decision-making members of Congress when they convene to vote on the next housing bill. The relationship between data, empirical research, and the media’s use of “scary numbers” can be somewhat contentious, arguably influential.
Again, I asked myself, have housing starts really dropped? Frankly, the answer is, we simply do not know. It is uncertain whether the percent change is an increase or decrease. However, we do know the media’s use—or misuse—of influential statistical information is at the very minimal, questionable.