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How Median Home Prices Can Be Misleading July 20, 2009

Posted by John Watch in AccuriZ Reports, News Feed.
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Reported from: Investor Centric: How Median Home Prices Can Be Misleading

“The median can be a deceptive statistic when it comes to real estate growth. Often home sellers will point to an increasing median and say that homes prices are increasing, but they can actually be decreasing.” – Investor Centric

This Investor Centric article explains the deception in the median sale price and how it isn’t a true indicator of market stability. What the article does not explain is a clear way to rid the deception; price per square foot.

As shown in the chart above, the median sale price of San Bernardino County has drastically increased. That doesn’t mean that the county’s home values are plummeting necessarily. As the article states, “they just don’t have enough higher price homes to sell.”

That’s why analyzing property data on a price per square foot basis broadens the scope on particular areas of the market. Public records show that higher priced homes have more square footage generally. It can be clearly seen that by analyzing San Bernardino county solely on the median it is not doing do well.

But based on price per square foot, is the San Bernardino County market good or bad?

In a recent report by AccuriZ titled “Square Footage Matters! Large homes indicate stable values” Northeastern Queens values proved not to be declining as significantly as Queen County in its entirety. This is based on price per square footage:

Source: AccuriZ

Source: AccuriZ

 Median Sale Price

 “Analysis of the Queens County single family market have declined 18% from 2008 and 21.3% since 2006. The sub-market of Northeast Queens indicates that property values are down 12.8% since 2006, with most of the decline occurring in 2009.”

Queens Price Per Square Foot

Source: AccuriZ

“A more detailed analysis of the median sale price based on the square footage of the residence indicates an entirely different pattern of price value changes. When the sales data is stratified into the calculated rate per square foot based on sale price, the rate of change for Queens County is -10.58% since 2006 versus -21.3% based on the Median Sale Price. For Northeastern Queens the rate of change is -.37% versus -12.8%. The data clearly indicates that building size represents a significant impact relating to the value of the property.” (For more of the “Square Footage Matters!” report, click here.)

With these statistics we would like to add on to the quote in the beginning, “Often economist and analyst will point to a decreasing median and say that homes prices are decreasing, but they can actually be stable.”

 So realtors, what do you think? Is the median deceptive? Is it used primarily as a selling point? Or is the median a true indicator?

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Comments»

1. james paden - July 22, 2009

These graphs are useful to adjust our daily living. thanks.

2. John Watch - July 22, 2009

No problem James.

3. Trellis Netting - January 24, 2013

Good day! I know this is kind of off topic but I was wondering which
blog platform are you using for this site? I’m getting tired of WordPress because I’ve had issues with hackers and I’m looking at options for another platform. I would be great if you could point me in the direction of a good platform.


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