January 26, 2007 | posted by Michael Baxter in IABN |

It’s not just cold in Blighty at the moment, the balls are falling off the brass monkey stateside too.

Oil has picked up in price, and then yesterday came bad news on the US housing market. But on this occasion, the housing market cocktail was mixed with a twist of good news too.

Yesterday, the National Association of Realtors (NAR) reported on an 8.4 percent drop in the existing home sales in 2006. Total sales fell to 6.48 million from the 7.08 million in 2005. You would need to rewind the clock back to 1989 to see such a big drop.

But then again, since 2005 was the best year ever for housing sales, maybe the drop was not quite so disturbing.

The silver lining, however, came in the form of December’s figures. For while the last month of the year saw a continuation in the fall in sales, the median price was unchanged on a year ago at $222,000.

The year on year median price had fallen in the four previous months.

This has led many economists to speculate that the worst is over, and that strength is returning to the housing market.

But, on this occasion, markets, which for so long now have been optimistic to the extreme, ignored the good news, and the Dow Jones Industrial 500 fell 119 points. It was a big fall, but not enough to cancel out all the gains of the year. The index is now 39 points up on the start of year position.

Finally, a point about the median.

We rather like the US idea of measuring US house prices in median terms. The median average is the middle point. In the case of house prices, it’s when there are exactly the same number of houses with a higher price as there are with a lower price.

The mean average can be distorted by extremes. The fashion in London for million pound plus houses is having a disproportionate effect on the average reading, for example.

The same principle incidentally applies to GDP per capita. There has been much in the press lately about executive pay, and how much of the new wealth has been centred on less people.

Maybe, if GDP was measured in per median capita we would get a truer picture of how much richer we are getting.