Confused About Conflicting Info on the Real Estate Market? This Should Help!

I saw a Facebook post announcing that the New Haven real estate market was down over 2% last year, when I know that multifamilies were up 12.5%, single families up 11.5% and condos were up around 3%. I was also hearing agents announcing the market was going down (but not crashing!) in Milford, when, in fact, it was up significantly, year over year.

Some were even claiming it is now a buyer’s market or hedging with “more” of a buyer’s market. A buyer’s market is when we have over 6 months of inventory. We have under 2 months of inventory in almost every local town.

So what is happening?

While analyzing the market is a special skill that not everyone has been trained for, mostly it is because larger companies provide very pretty reports that are automatically generated. Every market is different, so a statistic that works in, let’s say the Chicago office, may not work in our area. Unfortunately, I find that the prettier the report, the less accurate it is.

So I thought it might be a good idea to go over some terms, talk about what types of numbers make sense to monitor and why some numbers do not tell the whole story in certain areas.

Just some statistic definitions:

• Mean: what we typically think of as “average”. If we have 3 properties,, we add up the values and divide by 3 to find the Mean. ($125,000+$148,000+$162,000=$435,000; $435,000/3=$145,000. The Mean is $145,000)

• Median: We write the values down in ascending order then choose the middle number ($125,000, $148,000, $162,000: $148,000 is the Median value.)

• Mode is not usually used for these purposes (Mode is the number that appears most often in a set.)

Many reports talk about the Median Housing price. The Median Housing price is when we write all the values of the properties that are sold in a town in ascending order and take the middle number. What is good about this number is that, if there are some properties that are much higher or much lower than what is typical, they will not shift the value as much as they would by using the mean.

Unfortunately, when there are far more smaller properties (or larger properties), this CAN shift the median housing price so that it is inaccurate. This is what happened with my New Haven example. That is why I prefer to use the price per square foot instead. The price per square foot somewhat alleviates the variance that comes with different sized properties and, when taken over hundreds of properties each year, is a much more reliable indication of trends.