Comments on: If Housing is Going Down, Why is the Median Price Going Up?

By: twist

twist — Tue, 15 Aug 2006 00:52:01 +0000

Matt-

Excellent point- anyone who is selling that is not among the best homes in their price range, is probably going to languish. That means if you can’t outshine the competition, you will have to drop the price until you do.

By: Matt Kramer

Matt Kramer — Tue, 15 Aug 2006 00:32:09 +0000

I just want to note, that the idea of getting the “pick of the litter”, (as I commented on previously here), is an important reason for maintaining median home prices in a dropping market, because the PRICE PER SQUARE FOOT is also stable. That nullifies the idea that just bigger houses are being bought. They are certainly, better houses, in better areas.

I know this because I’m an agent, and when I show three houses now, they see only the best. That is the attitude of any responsible agent. Of course, I will show them pictured listings of some of the “average” properties, but actually showing them is a waste, except for educational purposes. The “Plain Jane” homes are just out of play right now.

So what’s the value of the “Plain Jane” home? It would have to be significantly lower if the prime homes are being bought at the same median price as a “Plain Jane” was 12 months ago.

By: Jonathan Miller

Jonathan Miller — Sat, 12 Aug 2006 23:31:38 +0000

Median sales price often rises when a market begins to turn. Quite often the lower end of the market drops out first which simply moves the midpoint of the market (median) to a higher number. This implies that the market is rising, when in reality, its simply a shift in the mix of what type of housing units are selling.

By: mike

mike — Fri, 11 Aug 2006 15:35:26 +0000

Great example today in sales reports for Zip 85215 (mesa az). Four sales this week:$225k,$280k,$1.95m,&$3.30m. Reported median equals $1.115m and last year four week average was $279k. Using the logic that median price changes equal appreciation I guess value went up about 400% in this area of Mesa, at least until next week!

By: John M.

John M. — Thu, 10 Aug 2006 11:21:56 +0000

TM -

Great dig! I’ll feature it in the side-bar.

By: twist

twist — Thu, 10 Aug 2006 02:41:16 +0000

TM-

Thanks for the post- I don’t know why your comment got caught in the Spam filter- I just found it. My comments keep getting lost there too- my techies out of town- I’ll ask why when he’s back.

By: tm

tm — Wed, 09 Aug 2006 02:59:34 +0000

As long as we’re talking about misleading information from the Real Estate “Professionals” Check out:

this gross lie!

Is it possible that this guy actually believes what he’s writing? These guys are professionals alright…Professional Liars!! I’m sure there are plenty of agents who will “tell it like it is” but you know what they say about the barrel and one bad apple…

By: Terry

Terry — Tue, 08 Aug 2006 23:18:56 +0000

Excellent article and comments. For those that may be interested, the following is a link to a post on the same subject: http://voiceofsandiego.org/articles/2006/06/02/columnists/rich_toscano/96toscano.txt

An important point to emphasize, as mike mentions, is that some real estate professionals use the term “median sale price”, without using other supporting data, as if it were a meaningful indicator of the direction of real overall market value. An actual quote from a real estate columnist in a newspaper in my locality is as follows:

“Average sales prices continue to appreciate. The median sales price countywide was up 11% from a year ago.”

Sales are down and inventory is increasing in my locale, yet I believe the above type verbiage will convince some people into believing that the overall value of real estate in our area is still indisputably appreciating.

By: Matt Kramer

Matt Kramer — Tue, 08 Aug 2006 20:12:00 +0000

Median Home Price is a formula that was appropriate when inventory levels were stable or on the decline. In this market, a more valuable formula would be be something like “Same Home Value”. When there is excess inventory, the inventory is “cherry picked”. He points out an obvious truth here. When you have selection, you will pick only the best, the most “bang for your buck”. These same homes demanded a only slight premiums in previous markets, because people looked at specs (i.e., sqaure footage, lot size, & comps), giving the 4-wall box greater value as a speculative equity. But, RIGHT NOW, it might take a 20 to 40% drop to coax someone into taking on a plain box as an investment, knowing that substancial upgrades will have to follow, along with greater competition and riskier DOM.

By: tm

tm — Tue, 08 Aug 2006 18:20:53 +0000

Both good points…The most poignant indicator of the current market is inventory versus sales volume. Why would anyone believe that prices would actually INCREASE when the Inventory/Sales ratio is enormous – In fact far in excess of previous records. For relative prices to increase in the face of this condition would violate basic tenants of economics.

The other problem with median sales statistics is they only reflect what HAS sold. What ‘s not reflected in these statistics is the overwhelming majority of sellers that continue to lower asking prices after months on the market. When these sellers are forced to take much lower offers you’ll start to see precipitous drops in median statistics.

By: Metroplexual

Metroplexual — Tue, 08 Aug 2006 16:03:28 +0000

mike has a point, here in the NYC region we are seeing the same price phenomenon but higher inventories and longer DOM. FWIW, my brother in law had spoke to ASU housing institute muckity mucks and they said a reason for the spike in prices last year was several high priced developments came on line at the same time which can further distort the numbers. Also, if I was a buyer in say fall of 2005 and put an order in for a very expensive house with some serious earnest money I would be likely to stay committed to the sale.

By: mike

mike — Tue, 08 Aug 2006 15:09:31 +0000

Any average(mean, median or mode) will be affected by the date mix. In the current case if a housing sales slow down is, as expected, first disproportionately at the lower price end of the market, then both the median and mean can rise even as price declines occur across all price ranges. Its math, not markets. Unfortunately one of the local papers tends to use such date as a measure of “how much your home has appreciated”, compounding the error.