Home "Values" and the Meaning of Words

May 17, 2011

Housing starts in April dropped more than 10% from housing starts in March. That was one of NPR’s lead stories this morning , as it was for many other news services. In the spoken version of the story, the NPR reporter attributed the drop in new construction to the glut of existing homes that are on the market because of mortgage foreclosures. The reporter went on to say that one of the problems these foreclosed homes posed was that they “were selling below their value.”

Excuse me?? “Selling below their value”? How can that be? What a home sells for IS its value. Here’s one dictionary definition of “value”: “2 : the monetary worth of something : MARKET PRICE”. There are a lot of things a home can sell for less than: it can sell for less than what the seller paid for it, or for less than its asking price, or for less than what the seller was hoping to get, or for less than the pathetic shack in a different neighborhood across the river. But it cannot sell for less than its value. Of course, it also cannot sell for more than its value.

NPR is a fine, professional organization, and I think I understand what the reporter was trying to say. But it could also indicate a fundamental lack of understanding of how markets work – not a good trait in a reporter reporting on business activity. When it comes to understanding the numbers around us, words matter. When the people we trust to make decisions and to inform us – public servants, politicians, journalists, etc. – are not clear, it leads to confusion or worse.

“Painting with Numbers” is my effort to get people talking about financial statements and other numbers in ways that we can all understand. I welcome your interest and your feedback.

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