You see the news loves to share with the general public all sorts of stats that make it seem so much worse than it actually is. Have you ever seen them explain how the statistic was derived or what it really means? I didn’t think so…
Here’s a fun example:
Let’s say in Newsville that in May of 2009 there were 2 homes that sold and both sold for $500,000 for a total sales volume of $1,000,000. In May of 2010 there were 4 homes sold and all four sold for $250,000 for a total sales volume of $1,000,000.
Now… here’s your 5 o’clock newscast:
HOME VALUES ARE DOWN 50%!!!!
There are actually three headlines here – 1. Home sales increased 100% (2 homes sold vs. 4 homes sold) 2. The average home price is down 50% ($25oK vs. $500K) 3. The $ volume of real estate sales is unchanged ($1 Million). So which statement is true? All of them. Which is the news going to report… the 50% drop in average home price. Are they going to explain how the number was derived? No way!
There is no way for the statistic of average home prices to truly reflect whether or not the value of a home went up or down. You would have to hire an appraiser to go out every year and get that value on that particular home. The statistic actually represents a shift in the average price of homes that are selling – NOT VALUE.
So how do you understand these statistics for yourself or what the market is actually doing in your area? Talk with a REALTOR® who can explain the market you live in! You see all real estate is local. Just because the national news says one thing, does not mean it applies in your neighborhood!
Here’s a great place to learn more about real estate statistics in general: