More Info On Housing Prices
I want to get into this matter of median house prices a little deeper because several people have spoken to me and cited an article from the Times from the 15th as proof that property values have fallen 14-percent in the last year.
On December 15, 2007, the St. Petersburg Times ran an article headlined "Home prices show big drop" with the sub-headline of "The November numbers mark the worst year-to-year price decline in at least a decade".
The article then went on to point out that the median price of a single family home dropped 14-percent between November, 2006 and November, 2007. The article then said "It was the worst year-to-year home price drop in at least a decade ...".
The median price figures do not tell you anything like that. The median price is simply the mid-point of what was sold during a certain time period. It means that half the people who bought paid more than a certain figure and half paid less than that figure. The exact middle figure between the two halves is the median price.
About the only thing the median price is good for is determining what is selling. It shows buying trends. Based on these figures, it appears that lower priced homes are selling now, and a year ago people were buying more expensive homes.
But the figure does NOT tell you that property values have dropped by 14-percent. That's not what median means at all, and when the Times publishes median data and says that property values have fallen by a certain amount, well, that's an erroneous misinterpretation of the facts that misleads people and may cause them to make false assumptions about their selling situation. If that is the case, then the Times has done its readers a grave disservice. If the Times does not know what "median pricing" means, perhaps they should Google-up the term, find the error of their ways and correct their story.
The Greater Tampa Association of Realtors keeps track of the average prices. Their figures show a 5-percent price reduction during the year ended November, 2007, according to the Times article. So, you might be tempted to say that the average house lost 5-percent of its value in Hillsborough County, but then again that "average" figure is based on sales data. So, all we really know is that the average price of the homes that sold in Hillsborough County dropped 5-percent in the last year. This may mean that people are buying less expensive property, not that homes have lost 5-percent of their value. Or, it may mean that there is an active market for lower-priced homes. Who knows?
What I do know is this: Property is worth exactly what a ready, willing and able buyer will pay for it on a given day. No more. No less. To try to interpret median prices and average prices as showing that property value is rising or falling is to misinterpret the data. Clearly, property prices are falling; Realtors are making price reductions in the MLS everyday. But writing that they have fallen 14-percent based on median prices is to misinterpret data and sensationalize facts. So don't be fooled by the Times article.
I hope I have cleared this "median price" matter up.
For more information on real estate in Pinellas County, please visit my website at http://www.thestpeterealestatesite.com/.
On December 15, 2007, the St. Petersburg Times ran an article headlined "Home prices show big drop" with the sub-headline of "The November numbers mark the worst year-to-year price decline in at least a decade".
The article then went on to point out that the median price of a single family home dropped 14-percent between November, 2006 and November, 2007. The article then said "It was the worst year-to-year home price drop in at least a decade ...".
The median price figures do not tell you anything like that. The median price is simply the mid-point of what was sold during a certain time period. It means that half the people who bought paid more than a certain figure and half paid less than that figure. The exact middle figure between the two halves is the median price.
About the only thing the median price is good for is determining what is selling. It shows buying trends. Based on these figures, it appears that lower priced homes are selling now, and a year ago people were buying more expensive homes.
But the figure does NOT tell you that property values have dropped by 14-percent. That's not what median means at all, and when the Times publishes median data and says that property values have fallen by a certain amount, well, that's an erroneous misinterpretation of the facts that misleads people and may cause them to make false assumptions about their selling situation. If that is the case, then the Times has done its readers a grave disservice. If the Times does not know what "median pricing" means, perhaps they should Google-up the term, find the error of their ways and correct their story.
The Greater Tampa Association of Realtors keeps track of the average prices. Their figures show a 5-percent price reduction during the year ended November, 2007, according to the Times article. So, you might be tempted to say that the average house lost 5-percent of its value in Hillsborough County, but then again that "average" figure is based on sales data. So, all we really know is that the average price of the homes that sold in Hillsborough County dropped 5-percent in the last year. This may mean that people are buying less expensive property, not that homes have lost 5-percent of their value. Or, it may mean that there is an active market for lower-priced homes. Who knows?
What I do know is this: Property is worth exactly what a ready, willing and able buyer will pay for it on a given day. No more. No less. To try to interpret median prices and average prices as showing that property value is rising or falling is to misinterpret the data. Clearly, property prices are falling; Realtors are making price reductions in the MLS everyday. But writing that they have fallen 14-percent based on median prices is to misinterpret data and sensationalize facts. So don't be fooled by the Times article.
I hope I have cleared this "median price" matter up.
For more information on real estate in Pinellas County, please visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 4:03 AM
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