The REAL Truth About Trends in Sales Prices in Grand Ledge, Michigan
Mary Ann Heindorf, Realtor, E Z Home Ownership Realty, LLC, Grand Ledge MI
3-7-08
(This is a series of many upcoming posts to analyze the ACTUAL TRENDS in SALES PRICES in the Greater Lansing Area. )
WHY I DID IT:
As well as being a Realtor, I am an analytical chemist and I analyze trends in data all day long. I thought I would share a recent data analysis project that I started working on shortly after the article came out in the Lansing State Journal (LSJ) indicating that 4th quarter 2007 home prices in Lansing fell more than anywhere in the nation. Because trends in real estate are heavily influenced by the location and price points in that particular market, I decided to query the Multiple Listing Service (MLS) by area to better identify changes over time in individual areas in Ingham, Eaton and Clinton Counties. We all know the three most important rules for investing in real estate are location, location, location. Articles like the one in the LSJ totally ignored that basic tenet of real estate.
WHAT I DID:
I started with the area that is defined by the Multiple Listing Service (MLS) as Grand Ledge. To compare with the 4th quarter statistics cited by the LSJ, I queried ALL properties sold in Grand Ledge from October 1 through December 31 for as many years as there was data in the property search portion of the MLS. I exported the data to excel and calculated the average and median values for each 4th quarter data set. I also calculated the standard deviation and various percentiles to provide an idea of the distribution of the data points around the mean, also called average. I didn't include any descriptive statistics here.
Also, to answer the question, how much of an impact are foreclosed properties having on the average and median values in the area, I identified as many REOs using both the style fields in the MLS and my knowledge of the specialties of various listing agents. I removed the REO's and re calculated the median and average prices. REO stands for Real estate Owned by a lender. These are homes that have been foreclosed.
WHAT THE DATA SHOW:
From the 4th quarter 2002 through the 4th quarter 2007, the average sales price of homes in Grand Ledge rose from $173,870 to $188,221. This is an increase of almost 4%, not the decrease described by the Lansing State Journal. The median is lower than the average for most years, and falls lower in the 4th quarter of 2007. However, the total number of homes sold in the 4th quarter of 2007 is 44, so, as you say, the median can become skewed by an outlying data point, such as an REO. The important number is the average which shows an increase in value. Evan Vanderway does a nice job explaining the difference between average and median in his recent post. I included the median here to follow up to Evan's post. Figure 1 shows a plot of the data. A maximum value was reached in the 4th quarter 2005 when the average exceeded $197,000, which is about a 5% spike. All in all, this set of data DO NOT indicate a plummeting in home values in Grand Ledge.
To determine the impact the sales prices of foreclosed homes would have on the overall average sales prices in the area, the REO's were removed from the data set. The average sales price rose from $174,478 to $194,126, indicating appreciation from 2001 to 2007. Again, it's the average you want to watch. The maximum value in 2005 reached $202,770, which is really quite close to the 4th quarter average in 2007 of $194,126, indicating good stability in the market for the last 3 years, not the decline blasted across the front pages of the LSJ.
As I have time, I will continue to investigate changes in sales prices in various locations through the greater Lansing area. I hope you will find the data useful. 
