LA Times article -- home prices surge (Los Angeles, San Bernardino: for sale, real estate)

[Charles]

Southern California median home sales price surges in June - Los Angeles Times

[ToadB]

Oh please. The LA Times have been beating the wrong drum forever. I remember an article from last summer about how it was the best time to buy.

If you want to read more than just fluff about the LA housing market, I suggest Dr. Housing Bubble.

"Prices are still going down. The Case-Shiller Index is the best measure since it looks at same home repeat sales. You have a few people like Jim Cramer talking about housing bottoms but they are looking at the median price. The problem with looking at the median price is that it is artificially high in the mania phase and low when a flood of distress homes hit the market. A perfect example is California where over 50 percent of homes sold are foreclosure resales. Ironically, now that you are seeing more price cuts in mid to higher priced areas you will see the median price go up or neutralize. Yet overall, prices are still heading lower."

[hsw]

Indeed, meaningless data skewed by mix issues; innumerate journalists (and economists) seem to struggle w/Stats 101....mkt for >$750K houses has been effectively frozen for past 9 mos in nearly every major urban region in US...just look at deminimus sales volumes in those price ranges

Westside is full of unsold mansions w/no bid and desperately being rented at rather cheap prices (obviously need to diligence creditworthiness of prospective landlord)

Residential real estate (esp upscale) is a discretionary, illiquid, long cycle market; takes ~3-5 yrs for prices to bottom after ?mid-'07 peak in upscale areas (inland foreclosureland started cratering earlier)

In '80s (micro)bubble, LA's Westside peaked in '89; bottomed in '94; and re-reached '89 prices in ~'00...

[EscapeCalifornia]

Does anyone know why housing stats always quote median instead of mean price? It seems like the median is too easily skewed and doesn't reflect how many houses are selling at each price level.

[drshang]

Originally Posted by EscapeCalifornia

Does anyone know why housing stats always quote median instead of mean price? It seems like the median is too easily skewed and doesn't reflect how many houses are selling at each price level.

Well, if the median home price is 300,000, every house sold for 3,000,000 will skew the data in a really unreal method. Think about it this way, say 11 houses are sold...3M, 1.5M, 700k, 500k, 400k, 350k, 300k, 275k, 220k, 175k, 145k. The median is 350k, the mean is 687k. Which one more accurately reflects the "average" price of a home of this sample? The actual data won't be THIS skewed, but it will certainly be skewed in a way that's probably not representative of what the "normal" price of a home is. Although perhaps the mean is a more accurate reflection of the "average" house price in a safe neighborhood that's fit for a college educated crowd, but in terms of total statistical data, it's probably not given the degree that prices can be above the median versus below the median. In statistics you try to take data that discounts outliers (data on the bottom and top 5% of each side) because that data can, in some cases, really impact the numbers in the middle, which is what you're after if you're going for an average. In this case the median will be more effective at discounting the outliers than the mean, which is probably why it's used. It's certainly not a perfect number for sure.

EDIT: one example where the mean is much better than the median would be if home prices were sampled like this: 900k, 900k, 900k, 900k, 900k, 300k, 300k, 300k, 300k, 300k, 300k. The median is 300k and the mean is 572k. Which is a better representation of this sample? Obviously this isn't really how housing data looks but there will be some data sets that look like this and depending what the data is sometimes different methods of calculating the "average" are better than the other.

[ToadB]

Median is better than average, but still easily distorted. For example, if you have subprime mortgage meltdown you have a lot of action at the low end of the market, dragging the median down. Then if that fades out, but you have an option-arm, alt-A mortgage meltdown causing action at the middle and the high end the market, then the median will go up, even though the actual prices are going down.

[EscapeCalifornia]

I guess no matter what "average" you use, it gets less useful in crazy times like these when different price quintiles have vastly different volume levels.

[SOON2BNSURPRISE]

From the top of the article;

The increase to $265,000 reflects a recent trend of higher-priced properties taking a greater market share. Sales volume reaches a 30-month high.

I am not currently in the market for higher priced properties. In my area homes below the $300,000 mark are low priced properties. At the same time I still see plenty of homes for sale that have yet to sell. Maybe the top end real estate is moving and monopolizing the numbers.

[timelesschild]

Yeah, and did you see the numbers variance between counties?

The overall Southern California median is $265k. However, this is due in part to San Bernardino County's median home price of $140k. That will bring down any kind of average - mean, median, or mode.

Los Angeles County's median home price is $320k, according to this set of data. Those aren't all 3/2's in safe neighborhoods, either.

But we're getting there, little by little.

[MtnSurfer]

Originally Posted by timelesschild

Yeah, and did you see the numbers variance between counties?

The overall Southern California median is $265k. However, this is due in part to San Bernardino County's median home price of $140k. That will bring down any kind of average - mean, median, or mode.

Los Angeles County's median home price is $320k, according to this set of data. Those aren't all 3/2's in safe neighborhoods, either.

But we're getting there, little by little.

Yeah, talk about skewing the numbers. Geesh. The majority of folks looking for a safe neighborhood in a nicer area are looking at much higher averages even today. And some places like the Inland Empire may hit rock bottom before these more appealing, in demand neighborhoods. So hitting The Bottom may occur over a longer period of time even within the Greater LA region.

Derek