Market Stats vs. Reality: Do falling prices matter?

NAR: Resale home price may fall 6.4% this year

The National Association of Realtors is now predicting that the median resale home price, nationally, will be 6.4% lower than it was last year. But reality is usually very different.

These national average numbers are an important metric for economists. It’s also important in so much as it influences the expectations buyers and sellers come to the table with. But they mean nothing when you’re trying to price a home.

The context that home is in, and the trends in that segment of the market are what matters, and that varies wildly! Here are a few examples of how important context is:

LOCATION, LOCATION, LOCATION

The Wall Street Journal recently ran one of the best articles I’ve read. Their point was that prices may be rising, falling, or flat lined depended on the zip code your in.

Example1: in the San Francisco market, zip code 95070 is down 7%, while 94025 is up 18%, both have a median sale price of about $1.5 million.

Example2: in the Augusta, GA market, zip code 30909 is down 6%, while 29841 is up 18%, both have a median sale price of about $130,000.

Example3: in the Richmond, VA market, zip code 23229 is down 13%, while 23225 is up 17%, both have a median sale price of about $235,000.

MORE THAN JUST LOCATION

Even in the same location there are many micro markets in play. Rising foreclosure rates have heavily influenced real estate markets across the country. And it’s skewing the statistics.

According to the Minneapolis Area Association of Realtors lender mediated (foreclosure/short sale) sales made up 27.6% of the total sales in first quarter 2008, by comparison in Q1 ’07 it was 9.3%, and in Q1 ’06 it was 3.5%. The median sale price of these lender mediated sales is down 15.9% while individual sellers (not banks) have only seen a decline of 3.5%. The median sale price of all homes averaged together is down 8% year to date.

THE POINT

Drawing conclusions about home values based on the wrong numbers/trends is fool hardy. You have to understand your market to know what a good deal is. People are smart and take real estate seriously, missing the mark on price will result in failure. Before buying or selling, be sure you (or your Realtor) really understand what is going on in the specific area, price range, and property type that is your market!