A case for segmenting data in market trends
I’m hearing so much buzz about the rising prices nationally, but real estate is local. Our market in Washtenaw County has largely been increasing in price, but some of the data observed is skewed in my opinion.
Take the following example: all sales in the Lincoln school district as exposed through the Ann Arbor Board of Realtors MLS (note, there are some duplicate listings due to data-sharing agreements) compared over time, to only those that are identified as arm’s length transactions (e.g., no distress sales).
The data for one year measured 12/1/12 compared to 12/1/13 indicates the following:
12/1/12 410 sales for the year with median sales price of $128,000 and median price per sqft of $72.23
12/1/13 401 sales for the year with median sales price of $153,450 and median price per sqft of $85.25
This is an increase in price over this one year period of 19.88% for the pure median and 18.03% on price per square foot.
Take away distress sales and the following is indicated:
12/1/12 166 sales for the year with median sales price of $144,500 and median price per sqft of $82.67
12/1/13 260 sales for the year with median sales price of $165,000 and median price per sqft of $93.22
This is an increase in price over this one year period of 14.19% and for the price per square foot of 12.76%
Which one would you consider more accurate?
To me comparing apples with apples is more accurate, which means normally the price per square foot change and only arm’s length sales, or 12.76% for this one year period, compared to 19.88% which could be used but really relates to a decrease in the number of distressed sales. You can see this by the total number that would be considered distressed on 12/1/12 (410-166=244 distressed) compared to 12/1/13 (401-260=141 distressed).
The purpose of this post is to encourage you to compare apples to apples for pricing trends as opposed to a lump sum. While both indicate rising prices in this instance, the difference in the rate is significant when the number of distress sales have declined to a large point.