Hi Tom-

I guess it’s no surprise that The Abyss likes math. After all, math has always been the great equalizer, because when all the hype and spin are wiped away, what’s left is the math. And, unlike a soon-to-be-former Alaska Governor who resigned to cash in on her newfound fame as Caribou Barbie/Bible Spice—and nothing more—math never lies.

And that brings me to the housing numbers, which are about to undergo the most salacious spin job since people were saying, “Real Estate never goes down.” (Insert sophomoric oral sex joke here).

As I pointed out in a previous post, the foreclosure tsunami has hit the “wealthy” (which I am now defining as “the people who bought high-end housing from 2000-2008 and now are wondering what happened”).

See, Tom, when “wealthy” folks lose their homes, they are losing higher priced houses. And those houses get counted in the National Median Home Price Index and also in local indices.

The Median is found by arranging values in order and then selecting the one in the middle. So, the Median of 1, 2 and 9 is 2. But the Median of 1, 5 and 6 is 5. As far as Averages go, Tom, the Median is a pretty slick operator that must be used with caution (much like its exotic cousin, the Mode Average). For instance, if you throw in a 9 all of sudden where previously there were only 3s and 4s, the Median can jump to the high side much faster than the Average you’re most used to—the Mean.

So when your local Mainstream Media drone publishes a story with the headline “Home Prices Rise,” that moron is talking about the Median. And the Median is rising because it is beginning to be populated with high-end foreclosure sales—as opposed to the Subprime Crisis, which was almost exclusively composed of low-end foreclosure properties.

This new trend of moneyed folks losing their shit neither raises the real price trend of housing, nor is it a good thing—since it means the pain is now being felt by serious wage-earning US families with Prime and Alt-A loans (which were supposed to be way better than Subprime).

And with foreclosures headed for an off-the-charts, annualized 3.5-4 million in 2009 and California U6 unemployment ticking up to 20% (1 in 5, Tom), we are simply in the middle innings of an epic collapse.

“Home Prices Up” is about as real as Sarah Palin’s commitment to serve her country, Tom. As she quoted General MacArthur in her awesomely dizzy resignation speech, “We are not retreating. We are just advancing in another direction.”

Big Statistically Significant Hugs,

The Abyss