Statistics… be very, very careful

I love being an insider in the real estate market and knowing better than the news outlets what’s REALLY going on.

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!

By the way… there’s a lot more to the market than average home price etc… and each home is unique and different! A good REALTOR® will guide you through all of it.

Here’s a great place to learn more about real estate statistics in general:

http://www.huduser.org/portal/periodicals/ushmc.html

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About utahREpro

Chris is the managing broker for Prudential Utah Elite Real Estate in American Fork, Utah. His passions include spending time with his family, Real Estate, Social Media, traveling, reading, movies, golf, dirt biking and so much more. Chris is a graduate of the National Association of REALTORS (NAR) Leadership Academy as well as the Utah Association of REALTORS (UAR) Leadership Academy. He has served in many capacities in the real estate industry at the national, state and local levels, including: 2013 Treasurer of the Utah Association of REALTORS 2011 President of the Utah County Association of REALTORS (UCAR) 2011 REALTOR of the Year – UCAR NAR Federal Political Coordinator assigned to US Senator Mike Lee 2011 NAR Strategic Planning Committee 2010 – 2013 NAR Public Policy Coordinating Committee 2011 Dean of the LeadershipUAR Program Chris has been a licensed REALTOR in the State of Utah since 2004. He has been recognized both nationally and locally by Prudential and was inducted into their Hall of Fame in 2010.
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One Response to Statistics… be very, very careful

  1. “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.”

    Perfect statement.

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