Statistics, the Media and Real Estate | The problems with housing market data: What does it all really mean?
The problems with housing market data: What does it all really mean?
I recently came across this blog post about housing market data, headlines and statistics. Honestly, I couldn’t agree more to what has been presented in terms of the daily news and how data is manipulated. Average, median and other “statistics” have even less contextual meaning in a “small” community because of the relatively small sample size and nearly no market significance when compared to an individual property.
The “quality” of the data has an impact. Is the reporting accurate? Do the reported sale prices include concessions (things the seller gives up to make the sale happen)? When a market has a limited data sample, the variances and inaccuracies have a larger impact.
Price per square foot has to be one of the worst benchmarks ever. Homes are not produce. They do not sell by the pound. Bananas are produce… Square footage is only one factor in determining price: style, location, fit & finish all affect price (and therefore price per square foot), lot size has an impact.
Another less than meaningful statistic is the “average number of days on the market”. There are too many factors influencing this number including: method of calculation for number of days; does a re-list count as new? does the days-on-market include the escrow period (it does here, and as such it’s a variable controlled by the needs of the clients, certainly not the “market”). There are plenty of other factors influencing how long a specific property is on the market (e.g. new construction listed prior to build out; poor location; unique style; condition of improvements, potential to obtain financing; price point…).
National statistics have very little meaning in a local market. It’s a little like trying to use the average temperature in the U.S. and compare it to a specific location. Not meaningful, especially if you’re in the warmest or coldest location. What’s more important is how robust is a local economy? How is the job market? What are the supply and demand levels?
As stated in the post, these kinds of statistics become more meaningful when compared to similar properties in similar neighborhoods.
The bottom line? The public needs to be very careful before they embrace any “news” with broad based statistical data. It’s interesting, but of limited value in a given market.
If you are interested in what’s happening in the Corvallis, Albany or other areas of the Mid-Willamette Valley, I’d be happy to help you figure out what the statistics mean to you.
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