Yet another economically depressing article has made its way into the media and with an aptly named title, “And Now For This Morning’s Gloom…” The article, written by Henry Blodget and published in The Business Insider on May 5, 2009 offers more insight into foreclosures, job loss, and the economy.

However, there was one noticeable red flag where there was a reference to an unlikely source when discussing the implications of foreclosures on job loss. The following is a snippet from the article:

“According to RealtyTrac, job losses result in a home foreclosure 10% to 15% of the time. If job losses narrow from the monthly average of 670,000 in the first quarter to 325,000, almost 3 million more jobs will be lost before year end. That will translate into another 300,000-450,000 foreclosures, and an unemployment rate of almost 11%. But what if that estimate of job losses is too optimistic?”

The first question that should have come to a reader’s mind is, ’since when does RealtyTrac monitor job loss and general economic statistics?’ Which then begs the second question, ‘if one can’t monitor their own industry with accuracy, why try and gauge another?’

In an attempt to try and identify the source of the job loss statement, I did a search on Google News and on the RealtyTrac site for job loss figures. In both searches there was no mention of RealtyTrac reporting on job loss in either outlet.

Considering this information there are only a couple of conclusions. One, RealtyTrac gave a very unofficial statement to a news reporter, in order to further broaden their media reach; or two, the reporter made their own assessment based on RealtyTrac’s estimated and quasi-convoluted figures.

Referring back to a recent Foreclosure Research article highlighting the law past by the state of Colorado, makes it illegal to utilize unofficial foreclosure figures when used to pass legislation or to gauge the economy. Translation: figures from a commercial listing service should not be used to sway opinion regarding economics.

If the reporter did utilize RealtyTrac’s foreclosure figures to extrapolate a job loss statistic, then most likely the concluding statistic is false. In another respect, the statement does not even specify whether job loss results in a ‘[pre]foreclosure or a regular foreclosure 10% to 15% of the time,’ as we’ve seen many reporters in the past confuse the two phases. And the fact that RealtyTrac always combines these two figures in their press releases is yet another concern.

Bottom line is that not only should there be a cautionary note when utilizing commercial foreclosure statistics, but those statistics should not be used to form an even greater, more influential statistic, especially when coming from an unqualified source.

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