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Real Estate Numbers - Can the Layman Explain Them?

By
Real Estate Agent with @Properties

When a non-real estate professional decides to write an article loaded with real estate statistics, can that be a good thing?  Particularly if those stats are accurate . . . but need some background to explain them?

An editor for our local Patch newspaper (which does occasionally publish some of my posts) wrote a article about January homes prices this year being "significantly up" from January of 2013.  The numbers were so outstanding that I checked the MLS myself.

For the two towns that were discussed, sale prices increased by 54% and 22%.  That's huge, don't you think?  I know that 2013 was a good year, it was the first year emerging out of the recession that dragged us to the abyss.  But that didn't sound right.

It turns out that the numbers are fairly accurate.  However, all the percentages are based on a very low number of sales.  The town that had the 54% increase in sales price had sales like this:

    January 2013

North Shore Market Report

January 2014

North Shore Market Report

As you can see, home prices in the 2nd example are much higher - it just happened, by accident, that more homes sold over $1 million this January.  And in January of 2013, 7 of the 8 homes sold for well under $1 million.  It doesn't mean that the local market has exploded into double-digit inflation.

Every list of numbers has a median in it, but proclaiming that prices have "significantly" increased is inaccurate and misleading.  At the very least, use a larger sampling - either the entire year, or the entire area for one month.  

I think real estate articles should be written or edited by real estate professionals.  The public will misinterpret the numbers and our jobs to get homes priced reasonably will be more difficult.

On two listing appointments this week, the sellers asked if I had seen that great article about house prices going up 54% . . . I believe I've got my work cut out for me.

 

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Comments(32)

Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

People are so gullible and that is why we have all these rules and regs plus laws. Hire up whenever you can for the big items is what I always say

Mar 07, 2014 10:04 PM
Raul Rodriguez
Covenant Partners Realty - San Antonio, TX
Looking out for the client's interest and not my p

Numbers play a big part in this industry we call Real Estate...they can work for you or against you.

Mar 07, 2014 10:18 PM
Richard Iarossi
Coldwell Banker Residential Brokerage - Crofton, MD
Crofton MD Real Estate, Annapolis MD Real Estate

Far too many variables can impact real estate statistics...especially when the actual sales are low. It takes a local Realtor to sort out the good from the bad.

Mar 07, 2014 10:34 PM
Laura Andersen
Keller Williams Realty Partners ~ 678.462.1191 agentandersen@gmail.com - Woodstock, GA
A HomeSOLD Name (678)462-1191 Woodstock, Georgia

We have a vacation home in Florida.  A local real agent send us her marketing materials on a regular basis.  What's interesting is that she goes back 65 months on status of her inventory list of the local area.  A lot has changed in the last five and half years with the economoy during this period.   

Mar 07, 2014 10:38 PM
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

I'm seeing agents making these same mistakes. They get market stats from the MarketLeader website and use those stats and graphs in blog posts. Unfortunately, for some reason those numbers are wrong. A simple check of the MLS would verify this but the agents aren't bothering to do that. Then when I post my market report with the correct numbers, I'm the one who looks wrong while it's actually them. Let's face it, sellers want to believe the person who posts the highest numbers not the one who reports the accurate numbers.

Mar 07, 2014 11:01 PM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Anytime you put statistics in front of someone, the numbers absolutely have to be placed in context. Otherwise they will be totally open to mis-interpretation.

Mar 07, 2014 11:37 PM
Margaret Goss
@Properties - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

Michael - you're right, it is like Zillow.  Crazy numbers that make people  happy.

Patricia - I agree, I just think the math is misleading

Laura - some clients are very statistics oriented and wany every number available.  Others don't want that overanalysis - just find me the perfect house.

Praful - definitely a minimum of 90 days would have been better

Maria - I assume so!

Debbie - a longer time period would have been better to make this type of statement.

Kat - My point exactly!

 

Mar 08, 2014 12:13 AM
Margaret Goss
@Properties - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

Lenn - sadly, true . . .

Michael - that's exactly my problem.  As I said, I have some work to do to "unexplain" that article

Jeff - that is so true - and making extrapolations from those stats can be wildly overstated as well

Richie - one rule might have been that an editor checked the article before it was published

Raul - indeed!

Richard - yes, and ultimately it's our job to explain the realities behind real estate statistics

Laura - that's laughable - and as inaccurate as the stats I show.  Six months to 1 year is best, I think.

Tammie - I get all my stats directly from the MLS as well.  I constantly see numbers being thrown around that I know are wrong.  

Nina - which is exactly what is happening to me and my clients.  I plan to put the context into the discussion.

Mar 08, 2014 12:20 AM
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Stats are like technology, they are tools not automatics. For example with the CBO did the study on the ACA they saw that older people could more easily retire since they could obtain good health insurance outside the existing job or jobs. It reduced the workforce time by up to 2%. Politicans then said 2 million jobs will be lost because of the ACA. It is all in the intrepretation as well as the fact that many sales never go from pending to active becuase of poor broker management, and other sales never go through the MLS.

Mar 08, 2014 01:06 AM
Colleen Fischesser Northwest Property Shop
NextHome Experience - Chelan, WA
A Tradition of Trust in the Pacific NW since 1990!

Context is always a must when it comes to stats. I see agents unfamiliar with certain markets post stats without understanding some of the nuances of that market. It can be deceiving w/out a sound explanation

Mar 08, 2014 01:34 AM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Boy that would be a bad situation to explain to the sellers that the facts were a bit skewed and do not really represent the true market.

Mar 08, 2014 06:54 AM
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

And in comparing the lower priced homes which sold in 2013, I'm sure they were not comparables in all things "comp" with the 2014 solds.  Yes, work cut out!

Mar 08, 2014 07:08 AM
Margaret Goss
@Properties - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

Joe - so many reasons to be suspect of laymen throwing numbers around

Colleen - so much bad information out there because of that!

Ed - I don't want to temper anyone's postive vibes about the market, but the truth must be told . . .

Carla - keep you fingers crossed for me!

Mar 08, 2014 07:22 AM
Francine Viola
Coldwell Banker Evergreen Olympic Realty, Olympia WA - Olympia, WA
REALTOR®, In Tune with your Real Estate Needs

Hmmmm sounds like we have the same reporter in my town, too!  Is it just that they really don't know and can't take the time to have someone interpret the numbers or are they just more interested in the dramatic headline? 

Mar 08, 2014 08:55 AM
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

That seems to be the way real estate professionals have been comparing. Large home vs medium mixed using median price. 

I only show price/gla sf for average size homes. For example, 3-4 br, 2+ bath, 1300-2100 sf, certain lot size range. I also average the average 3 month.

I benchmark against highest qtr price (2006), and trough(2011 Q3-Q4 avg) and compare against zipcodes (combine several, say east, south , central ). The trend becomes very clear.  During the Great Recession I told them to hold off purchase as the market still kept dropping after Obama declared the recession was over. In deed the REO, # of defaulting, those went to short sale and those went into regular sale made a lot of sense during economic recovery. That took about 2 years to deplete the distressed property inventory.

To be credible one has to do his own analysis as most realtors are known to mispresent data using these sources. I am in Silicon Valley the opinion, hand wave of many realtors turn off highly educated professionals. When making a statement where is your data support such claim is what people are looking for.

That also goes for home price. Zestimate is not going to cut the mustard. Where is the appraisal rpt? I post them on Trulia blog (Sam Shueh) do I get inquiries taking the time to be accurate.

Sam Shueh

Keller Williams Cupertino Realty

Mar 08, 2014 11:10 AM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher
Being relatable is the toughest part in certain cases.... especially with the numbers. Good luck! Love and light, Laura
Mar 08, 2014 01:03 PM
Margaret Goss
@Properties - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

Francine - both probably, but a dramatic headline is probably #1

Sam - you obviously put much more effort into your reports than most realtors.  And as many have said, even real estate professionals misrepresent data all the time.  You really can't believe anything anymore.

Laura - it is difficult to do the work correctly and make it relevant for readers

Mar 09, 2014 12:13 AM
Eric Kodner
Madeline Island Realty - La Pointe, WI
CRS, Madeline Island Realty, LaPointe, WI 54850 -

It's easy to skew data results when the number of properties examined is small. Market reports should at least include a disclaimer when drawing conclusions on hastily-assembled statistics.

Mar 09, 2014 11:50 PM
John Jonas
ReplaceMyself - Virtual Assistants - Highland, UT
John Jonas

Totally agree.. Better leave it to professionals to avoid confusion.

Mar 12, 2014 01:11 AM
John G. Johnston
John G. Johnston & Associates, LLC - Westcliffe, CO
An Exclusive Buyer's Agent ~ Westcliffe, CO

Margaret I think those of us that represent a realistic market can sleep much better than those that 'make it work for them'.  It serves my ego well when someone acknowledges I knew what I was talking about.  Our reputation speaks volumes!  Great blog.

Mar 13, 2014 12:31 PM