RE: Home Prices Continue Slide
The other day, I read the aforementioned article in the Daily Breeze and couldn’t help but feel that it was misleading.
I say this because of the fact that just because the median housing prices are lower now than in the past does not necessarily mean that prices are falling, only that the current median is the average price range were houses are selling (or people are buying).
Understanding what the Median is and what it isn’t
The Median plays an important role in the world of statistics. By definition, it is a value which divides an array into equal parts.
In the world of real estate that translates into the total number of homes sold by the total dollar value. This number can be greatly skewed (up or down) by what is referred to as an “Outlier.” (An “Outlier” is a value far from most others in a set of data which make statistical analyses difficult).
Outliers are caused by many reasons such as a property transferred between family members at below market prices or a property sold as a “short sale” by the bank or at a “foreclosure auction” at a discount. An outlier may also be caused by the sale of a home so expensive that it increases the overall median all on its own.
Back to the article
In the instant case, the article states that the median price of a home in the South Bay fell 12.7% to $460,000 …
however, when you look at the facts, these disregarded several of the cities in the South BAy such as Palos Verdes, Manhattan Beach, Hermosa Beach, El Segundo, LAwndale, Lomita, Carson, and Gardena.
The only common sense in the whole article came from the Redodno Beach planning commissioner (maybe this guy should ask a REALTOR) who stated that things on the low end are what is moving right now (like condos and town homes) "the average unit is probably in the mid 400,000 range. so these things are quite a bit below the median. if enough of these pass escrow, it could cause the median in Redondo Beach to hit the floor. but it won't affect my home value."
Analysis
As previously mentioned, all that the median priced home tells us is that that is the average price range were houses are selling or people are buying. There is absolutely no information within the article that can be used to ascertain whether or not prices are actually falling.
What this Journalist should have looked at.
The writer of this article, Muhammed El-Hasan, did not look at the much more important figures such as: the true data without the outliers, dollars per sq. foot (on comparative homes) or how many months worth of inventory is on the market (on a month-to-month basis). All of which are far better indicators of the direction of the real estate market.
About the Author
Greg M. Ingerson, Attorney At Law & Real Estate Broker, is a real estate Broker with LA Home Search in Los Angeles, California. To learn more about the Los Angeles Real Estate Market, please visit http://www.blog.LAHomeSearch.com
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