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I ll start by saying I understand all the caveats that each home is different, each market is different etc. BUT, as a GENERAL RULE, what do folks think here is the best indicator of base values of homes?
I ask, because (according to trulia), my zip code of 85222 (which includes almost my entire city), has shown the expected dramatic drop in median prices, a HUGE drop in average listing prices, especially over the last month or so, BUT a large INCREASE in sold prices per square foot. Our MEDIAN price is back to 2004 levels, but the sq ft price is still much higher than 5 years ago.
My independent research has sort of confirmed this trend, although I ve sensed a much smaller increase per sq ft increase than trulia shows. I track the weekly sales on the county assessor and then divide the square foot price. Of course this doesnt take into account lot size/location, condition etc....but its one indicator.
My initial thought on the reason for such a large drop in LISTING prices (almost 40% over the last couple months) could be that most of the larger homes, and the nicer condition homes have been snapped up (we really only have a 3-4 month supply of inventory showing on MLS right now - yes I know this doesnt include all the bank stuff not listed yet). As a result there are only the distressed and smaller stuff left for sale, hence the large listing price decrease. Its just a theory, but makes sense given the sq ft price increase?
Unfortunately I dont have the AVERAGE SALE PRICE available for just my zip code...the local MLS sites only have it by our entire county...which has all sorts of different levels of naborhood.
SO, which is best indicator? I ve been sort of going on sq ft...but the media etc always seems to use median price?
Value: equivalent worth or return in money, material, services, etc.: to give value for value received.
With that definition in mind, I believe you would use all of them collectively.
I ll start by saying I understand all the caveats that each home is different, each market is different etc. BUT, as a GENERAL RULE, what do folks think here is the best indicator of base values of homes?
I don't understand what you mean by the "base value of homes"
I ll start by saying I understand all the caveats that each home is different, each market is different etc. BUT, as a GENERAL RULE, what do folks think here is the best indicator of base values of homes?
I ask, because (according to trulia), my zip code of 85222 (which includes almost my entire city), has shown the expected dramatic drop in median prices, a HUGE drop in average listing prices, especially over the last month or so, BUT a large INCREASE in sold prices per square foot. Our MEDIAN price is back to 2004 levels, but the sq ft price is still much higher than 5 years ago.
My independent research has sort of confirmed this trend, although I ve sensed a much smaller increase per sq ft increase than trulia shows. I track the weekly sales on the county assessor and then divide the square foot price. Of course this doesnt take into account lot size/location, condition etc....but its one indicator.
My initial thought on the reason for such a large drop in LISTING prices (almost 40% over the last couple months) could be that most of the larger homes, and the nicer condition homes have been snapped up (we really only have a 3-4 month supply of inventory showing on MLS right now - yes I know this doesnt include all the bank stuff not listed yet). As a result there are only the distressed and smaller stuff left for sale, hence the large listing price decrease. Its just a theory, but makes sense given the sq ft price increase?
Unfortunately I dont have the AVERAGE SALE PRICE available for just my zip code...the local MLS sites only have it by our entire county...which has all sorts of different levels of naborhood.
SO, which is best indicator? I ve been sort of going on sq ft...but the media etc always seems to use median price?
YOU are the best 'indicator of value', after taking into account all of the other indicators you mention.
rubber - yeah, that may have been a poor word choice - basically I mean "best guess" value indicator. Obviously the variables are so numerous we have an entire appraisal industry to properly (in theory at least!) value a specific property.
But, people to like to try and figure out trends of course, and what I was saying is that the media tends to use "median sales price" as the guage for trend direction...Im wondering whether that is the best guage, or is "average sales price", or "per sq ft sales price" might be better - again, with the caveat that there are a million variables.
rubber - yeah, that may have been a poor word choice - basically I mean "best guess" value indicator. Obviously the variables are so numerous we have an entire appraisal industry to properly (in theory at least!) value a specific property.
But, people to like to try and figure out trends of course, and what I was saying is that the media tends to use "median sales price" as the guage for trend direction...Im wondering whether that is the best guage, or is "average sales price", or "per sq ft sales price" might be better - again, with the caveat that there are a million variables.
In my area, we have a relatively normal suburban market, that is bounded by the west to a historic downtown filled with dilapidated housing projects and mansions, to the east and northeast by two barrier islands filled with $1m - $5m homes, and to the south by two more beach communities.
So if I look at "average price", that figure is affected greatly by all those huge houses, whose price dynamics might as well be another planet from the starter homes I'm looking at. It also includes the slums, which may or may not be indicative of the data I'm looking for. For me, the median number is a more accurate gauge than the average number, since it excludes those beach mansions and housing projects, and focuses on the middle.
What I've noticed is that our local press clippings come straight from the local Realtors' association office. They will pick whichever figure is the most optimistic for the given month or quarter, and write up a press release using that one statistic.
Also, I don't use Trulia or Zillow data. I trust it less than I trust data derived from the MLS. I stumble upon plenty of homes on Trulia/Zillow that were listings from years ago, as far back as 2001. I seriously doubt they perform any quality control on their data.
In my area, we have a relatively normal suburban market, that is bounded by the west to a historic downtown filled with dilapidated housing projects and mansions, to the east and northeast by two barrier islands filled with $1m - $5m homes, and to the south by two more beach communities.
So if I look at "average price", that figure is affected greatly by all those huge houses, whose price dynamics might as well be another planet from the starter homes I'm looking at. It also includes the slums, which may or may not be indicative of the data I'm looking for. For me, the median number is a more accurate gauge than the average number, since it excludes those beach mansions and housing projects, and focuses on the middle.
What I've noticed is that our local press clippings come straight from the local Realtors' association office. They will pick whichever figure is the most optimistic for the given month or quarter, and write up a press release using that one statistic.
Also, I don't use Trulia or Zillow data. I trust it less than I trust data derived from the MLS. I stumble upon plenty of homes on Trulia/Zillow that were listings from years ago, as far back as 2001. I seriously doubt they perform any quality control on their data.
Great subject. RE Agents don't really know the difference either.
I don't like absolute prices because market trends cause shifts in the size of the homes sold.
Price per SF to some degree limits this though not totally. For mass built tract housing small is actually more expensive than large. So a trend to smaller houses will cause the median or average price per SF to increase. It is however a relatively small shift...
Another approach is to kill the top and bottom 10% and plot the average of the 80% in the middle. This causes the outliers to go away. I think mathematically it is really only important to kill the top 10% but humans like the symmetry.
I think I will do a blog on the subject in the next few days and show some real data.
But for most purposes I would use the price per SF of both the median and average. And I would think a lot about why they are different...if they are.
But for most purposes I would use the price per SF of both the median and average. And I would think a lot about why they are different...if they are.
Good overall response.
Knowing why if indeed there is a why is critical.
May I add ( as you very well know) location, condition and updating are huge factors. So is seller and buyer motivation.
And lastly, only the parties to the transaction know the terms of the transaction. Maybe the buyer was willing to pay more for a quick close. Maybe the seller was willing to take less for a quick close. Maybe closing costs were a part of the deal. Maybe not. Maybe $10K was put into reserve for repairs. Maybe not.
An appraisal by definition is an estimate of value at a specific point in time.
Any valuation by its very nature is only truly valid for the day it was done.
The only "fact" are sold prices.
The sold prices used must have occurred as close to the "day of valuation" as p[ossible. The comparison is with a similar properties with +/- dollars with corresponding +/- features.
Averages for a large area give an impression of the market for that area when compared to itself over history.
Each property is unique and must be treated/valued as such.
I would think the question was how to tell what is going on in a neighborhood or a zip.
I would think an appraisal of each home an overkill.
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