Statistics and Pricing

By
Real Estate Agent with Prudential Northeast Properties
I love to play with numbers.  I am no mathematician, but a high school math teacher did finally help relieve me of the pain in a subject I had struggled in my whole life.  Statistics are actually interesting!  They reveal things about how systems are likely to play out in the real world.  Real estate is such a superb industry for data.  I think it is one of the most transparent businesses.  Through the MLS, I can see exactly what every one of my competitors has sold, can track the prices of any kind of home, even see what compensation is being offered.  There is so much data, and all of it is available.  Applying statistical analysis of the data is the next step.  My MLS system easily provides median and average sale data, but choosing the grouping is up to the agent doing the search, and the results will be affected by that.  

There are many ways that I analyze data do determine pricing and offers.  One interesting equation gives an accurate representation of the current inventory on your market.  Don't look at pubished Days on Market numbers.  Instead, divide the number of homes that are current in your area by the number that have sold in the last year, or whatever time period makes sense, and multiply this by twelve, and you instantly know about how long your inventory will last.  

For example:  if there are 120 homes current in your market, and 100 have sold in the last year, 120/100=1.2.  1.2x12= 14.4 month inventory.  
From here, you can apply statistics to determine a price that will achieve your seller's goals and time frame, but you'll have to see that in a future post titled Standard Deviations!


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