Median Price Drop Is Bigger Than Reported
The St. Petersburg Times ran a story by James Thorner on December 15, 2007 in which it was reported that the median price of a single family home in Pinellas County dropped 14-percent for the year ended November 30, 2007. The article indicated that the November drop was the biggest year-to-year price drop in at least a decade, maybe longer.
Let's be clear about what "median price" means. Median price is the halfway point. It means that half the people who bought a house paid less than the mid-point price and half paid more than the mid-point price. Please do not confuse "median" with "average", they are two different things and can be entirely different numbers. So, when we say that the median price dropped, it does not mean that the average price dropped, and it may not mean that prices dropped at all. It does mean, however, that more people are buying less expensive property. The reason they are able to buy less expensive property may be because prices are coming down overall.
Readers of this blog know that I have written numerous times that the downturn in real estate sales actually began in June, 2005 according to the Pinellas County absorption rate, and that median prices have been dropping since that date. Some months the median goes up a little, some months it goes down a little, but the trend since mid-2005 has been downward and that's when this whole thing started -- at least, in my book that's when it all started.
So, I think it is fair that we take a look at median prices not from November 2006 but go back to November 2005 to see just how deep this decline really is. Here are the numbers from the Pinellas Realtor Organization (PRO), the same source cited by the Times in their story.
November 2005 Median Price: $259,000
November 2007 Median Price: $185,000
If you do the math, you'll see that the median price for the two years ended November 2007 is actually a drop of 29-percent.
Here's my point: median prices have been falling for over two years, not just one.
If you want to know the real figures on this real estate correction, you need to make comparisons from where the market was at the time the correction began, which was in mid-2005.
If you do, you'll see that this is a much deeper and longer-lasting decline than that predicted by those real estate gurus two-and-a-half years ago. You remember those guys, don't you? You know, the nationally syndicated experts who wrote that the real estate market would experience a "soft landing".
The Times article is great news for buyers. A drop in median prices of 14-percent in one year means buyers should be able to find real bargains right now, especially for homes priced over the median figure. The farther you get away from the median figure, the more difficult it is to sell a house, so those sellers should be more willing to negotiate favorable prices and terms with today's buyers. For prices to drop that much in twelve months means sellers may be lowering their asking prices and/or accepting lower offers for property. With huge inventories now on the market, this has got to be a great time to buy.
For sellers, if you want to sell you need to get to rock-bottom on your pricing while remaining within your price range for comparable homes in your neighborhood. Remember, the median price is falling which means buyers are not willing to pay high prices and are making lower offers. I've never seen a more price sensitive market than what we have today. There are buyers out there, but in order to get them to bring you an offer, you're going to have to price your property so that it is the best value in the neighborhood. Today there is an oversupplied real estate market. In such a market, only the best values will be purchased. That's all you need to do, along with implementing a first-rate marketing plan so people know your property is available.
Anyway, if you'd like more info on real estate in Pinellas County, visit my website at http://www.thestpeterealestatesite.com/.
Let's be clear about what "median price" means. Median price is the halfway point. It means that half the people who bought a house paid less than the mid-point price and half paid more than the mid-point price. Please do not confuse "median" with "average", they are two different things and can be entirely different numbers. So, when we say that the median price dropped, it does not mean that the average price dropped, and it may not mean that prices dropped at all. It does mean, however, that more people are buying less expensive property. The reason they are able to buy less expensive property may be because prices are coming down overall.
Readers of this blog know that I have written numerous times that the downturn in real estate sales actually began in June, 2005 according to the Pinellas County absorption rate, and that median prices have been dropping since that date. Some months the median goes up a little, some months it goes down a little, but the trend since mid-2005 has been downward and that's when this whole thing started -- at least, in my book that's when it all started.
So, I think it is fair that we take a look at median prices not from November 2006 but go back to November 2005 to see just how deep this decline really is. Here are the numbers from the Pinellas Realtor Organization (PRO), the same source cited by the Times in their story.
November 2005 Median Price: $259,000
November 2007 Median Price: $185,000
If you do the math, you'll see that the median price for the two years ended November 2007 is actually a drop of 29-percent.
Here's my point: median prices have been falling for over two years, not just one.
If you want to know the real figures on this real estate correction, you need to make comparisons from where the market was at the time the correction began, which was in mid-2005.
If you do, you'll see that this is a much deeper and longer-lasting decline than that predicted by those real estate gurus two-and-a-half years ago. You remember those guys, don't you? You know, the nationally syndicated experts who wrote that the real estate market would experience a "soft landing".
The Times article is great news for buyers. A drop in median prices of 14-percent in one year means buyers should be able to find real bargains right now, especially for homes priced over the median figure. The farther you get away from the median figure, the more difficult it is to sell a house, so those sellers should be more willing to negotiate favorable prices and terms with today's buyers. For prices to drop that much in twelve months means sellers may be lowering their asking prices and/or accepting lower offers for property. With huge inventories now on the market, this has got to be a great time to buy.
For sellers, if you want to sell you need to get to rock-bottom on your pricing while remaining within your price range for comparable homes in your neighborhood. Remember, the median price is falling which means buyers are not willing to pay high prices and are making lower offers. I've never seen a more price sensitive market than what we have today. There are buyers out there, but in order to get them to bring you an offer, you're going to have to price your property so that it is the best value in the neighborhood. Today there is an oversupplied real estate market. In such a market, only the best values will be purchased. That's all you need to do, along with implementing a first-rate marketing plan so people know your property is available.
Anyway, if you'd like more info on real estate in Pinellas County, visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 6:20 AM
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