A second quarter 2010 data report by Zillow.com claims there is a noteworthy decrease in the national percentage of underwater homeowners. Currently, 21.5% of homes are underwater — down from 23.3% in the first quarter of 2010 and 23% from the previous year.

The data service attributes the decreasing percentage of underwater homeowners to rising prices triggered by state and federal tax credits, along with an increase in the number of foreclosures.

first tuesday take: The so-called “drop” in the number of underwater homes this quarter is dangerously misleading. A more in-depth analysis of the calculation process used to obtain these numbers reveals that the home valuation index in this case is almost certainly based on the median prices of all homes in a designated area.

Median numbers tell us nothing. Because there is an increase of high-tier property sales at ever lower prices, these high-tier transactions are creating the illusion of increased prices across the board. The median price rises when the weight of these larger sales tips the scale upwards.

The median number sits in the dead center of the actual recorded data and reflects a phantom price that cannot be assigned to any single home. Because the percentages cited by Zillow.com are based on median numbers, the decrease in underwater homeowners they reflect is most likely inaccurate.

It is vital for agents and brokers to carefully research the statistics they use to form their opinions of the market which they disseminate to clients. Many media resources rely heavily on these irrelevant median price data points to push whatever policy or opinion they see fit.

All sources have a bias one way or another, but finding accurate information that reflects the unique characteristics of the local market will provide for the most relevant, educated analysis (as all informed agents will know, real estate is local).

Avoid median numbers; they only serve to cloud statistics and arrive at shaky conclusions. California agents should keep in mind local geography and diversity set this market apart from the national forecast. Similarly, California’s uniquely large disparity between high- and low-tier properties is completely glossed over by the reductionist median figure. It would be more prudent to study trends in local neighborhoods, compare different price tiers and evaluate similar homes over the past couple years to discover whether or not data reports are useful. [For more information regarding median price figures, see the May 2010 first tuesday article, Looking through the window towards recover: a real estate paradigm shift — Part II.]

Agents and brokers should know that a myriad of underwater homeowners still remain in their homes and continue fecklessly paying down their mortgages. There is still a great need for real estate professionals to share their expertise with those who are unfamiliar with their options in this situation. [For more information on the strategic default options available to a negative equity homeowner, see the March 2010 first tuesday article, The underwater homeowner, his future and his agent: a balance sheet reality check Part I and Part II.]

Re: “Fewer U.S. homeowners underwater as Calif. home prices rise” from Bloomberg