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Are You Tired of the B.S.? July 7, 2009

Posted by John Watch in AccuriZ News, News Feed.
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Apples and Oranges

Let’s stop comparing apples to oranges.

Rates are up. Values are down. The market is in shambles. This is what you’re used to hearing. Right?

Wrong.

The majority of market reports that we as the masses use to foretell trends only provide a fraction of the facts, based on a fraction of the data and public records, like the median sale price index. To determine the market outcome solely on a median sale price is like blindly picking different weighted fruit from a hat and determining sales; you can pick out an apple – but how much that apple is selling for or how many apples have been sold – says nothing about the oranges or watermelons still in the bag. It would be ridiculous to base watermelon sales off of the median sale price of all fruit.

Yet this is what we do with real estate. Why?

If more high-end homes are sold in a month (watermelons), the median sale price is higher. If more low-end homes sell (oranges), it’s lower. What more can you get out of this information, but a broad generalization?

Nothing. If more reports based their property data data on a price per square foot basis, the conclusions of the data would look much different. Sure, apples may not be selling as much, but that should lead to more questions than general answers like,

– Are there too many apples in the market? (Oversupply) – Do they cost too much? (The rise of square footage in homes over decades) – Are they out of season? (“McMansions” sitting on the market)

These question can’t be proposed, nonetheless answered, based on a median sale price.

While some say New York has another 40 percent to drop on home values, we say, by accurately looking at the data, it’s more like 15 – 20 percent. And this is based on a price per square foot basis.

So let’s get rid of the BS, and start really analyzing what’s out there. Because it is not as bad as some make it seem.

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