What frustrates us about so much of the data many economists quote to enlighten us on what's happening to housing is that it lags reality to a damaging degree. Bureau of Labor Statistics income and job formation data, Census Bureau numbers on household formations and new-home sales, and many other government measures contain helpful yardsticks to talk about hindsight. But these statistics seldom serve to demystify why foot traffic in so many neighborhoods' sales centers and model homes has slowed to a trickle.

John McManus Beneath the mask of official counts on new- and existing-home inventory growth, new-home order declines, starts, and permits data, there's reality. Reality, whether we like it or not in this business, is a household-by-household drama that plays out as all-too-human dreams–some attainable and some simply false hopes–weave in and out of monthly and one-time bills. It's at this household level where we can see the real-dollar bump on mortgage and associated housing costs, especially in the entry-level segment of housing's food chain that tells the story both of why things are where they are in the new-home economy and what may need to be done about it.

While we almost inevitably expect and allow government officials, bureaucrats, lawmakers, regulators, appointees, and Beltway hangers-on to mistake these statistics for authentic and valuable insight into how society and business work together, it becomes clearer every moment that businesses, such as housing, need their data to come with far greater precision and probity than the beleaguered Census Bureau and its like could ever provide.

For 48 months from 2002?2006, the consensus among industry leaders was that the economic fundamentals for a "normalized" demand for new homes were in place as long as the economy continued to grow and create new jobs; as long as natural obsolescence and replacement trends continued to occur in the housing stock; as long as people continued to want to immigrate into the United States to both serve as laborers and eventually buy the homes; and as long as America's corporate players continued to generate positive earnings, perpetuating the economic cycle.

An overflow of positive data clouded simple but important negative truths. The most important one that got missed was false wealth. Phantom wherewithal–created primarily by the Fed's manipulation of interest rates to a zero-barrier-to-entry level during the early part of this decade–got people to thinking they had money to make monthly payments for housing, cars, entertainment, etc., irrespective of the size of their savings or paychecks. Remove the natural barriers to what's in one's pocketbook, and you've got what we had in housing during that four-year period. A future mess.

Now, government data plods along at its merry pace. It will indicate that things are dreadful long after they've turned far more positive than they are now. Big builders should pay it no mind. What big builders should pay most attention to right now is the ability of home buyers, mostly entry-level home buyers to pay their monthly bills.

Real estate market guru John Burns noted to me recently that today's housing slump is not a recessionary downturn but an "interest-rate downturn." To which I simplistically replied, "Is today's 6.75 percent interest rate the new 18 percent interest rate we saw in the 1980s?"

John points out that it is. When you look at a household-by-household level at the impact of the increase of interest rates on mortgage payments in the past three years, you see a 50 percent increase, just as there was a 50 percent increase [on the net effect on mortgage rate payments] during that 1980s downturn.

So, as the industry looks ahead to what will go either poorly or well during the next stretch of time, a key part of the focus needs to be on the simple interplay of dreams and purse-strings on a home by home basis.

Don't expect the government or its agencies to help solve anything at this level. They're too busy looking at old data.