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Sep 05

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CA Association of Realtors Try to Sell More Homes by Suggesting that Correlation = Causation

The California Association of Realtors (“CAR”) unsurprisingly wants people like you and me to buy homes. One of CAR’s newest selling tactics is an infographic proclaiming that “Owning a Home Benefits Your Children.” CAR asserts that children living with home-owning parents are much more likely to perform well in school, complete a college degree, and therefore earn more throughout their lifetimes.

On several other occasions (examples here, here, and here), we have reiterated that correlation doesn’t equal causation. Unfortunately, this platitude bears repeating in this instance because the strongly positive correlation championed by CAR doesn’t necessary indicate that homeownership actually causes academic achievement. Several other explanations might account for this relationship. First, homeownership is strongly associated with household wealth, which itself strongly predicts academic success. That children of wealthy parents turn out more educated and rich themselves is neither novel, nor indicative that homeownership has any positive effects on children. Wealthy parents are able to pay for better schooling for their children (e.g. tutoring, private education, SAT prep courses) and generally prioritize education highly (because rich parents are on average more educated themselves). Additionally, children with wealthy parents typically don’t face the same demands to work while going to school, freeing up time to focus on scholastic pursuits.

With such an obvious (and more plausible) account for the allegedly positive effects of homeownership, a more sophisticated statistical technique is likely required. In two previous posts (here and here), I discuss examples of these techniques, which, if performed correctly, can produce solid causal inferences.

About the author

Benjamin Bohr

Benjamin is a manager at Fulcrum Financial Inquiry. He specializes in statistics and data analysis for use in high-stakes litigation, business valuations, and other financial matters.

Permanent link to this article: http://betweenthenumbers.net/2013/09/ca-association-of-realtors-try-to-sell-more-homes-by-suggesting-that-correlation-causation/

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