Messing with the Odometer – The Truth About Real Estate Statistics
You can’t always believe what you read. We all love to see the market trend data. In the chop shop of real estate statistics, however, what you see may not be what you get.
Average days on market, average and median sales prices, and price per square foot are a few of the more popular market indicators, and they provide value to the agents and consumers alike. Agents rely on this data to advise clients on proper pricing and to manage the market time expectations of sellers. Sellers care for the same reasons. What their neighbor’s home sold for and how long it took are important factors in their likelihood of success. And buyers, of course, attempt to glean insight into the direction of home prices in their community and even into the motivation of the sellers. “That home has been on the market since Woodstock; the owners must be really desperate!”
I have begun to pay more attention to cautioning sellers as to the inherent inaccuracies in market statistics, keeping in mind that sellers have the most to gain (or lose) from relying on the numbers to price and plan. Following are the two biggest examples of tinkering with the dashboard:
- Days on market: The average days on the market for homes both listed and sold in an area are ALWAYS higher than that reported. When a listing expires or is canceled and relisted, the clock rolls back to zero. If you really want a true picture of market times, be sure to take into account the statistics for these ”failed to sell” properties. Case in point, this morning, Scripps Ranch had 122 active listings, yet within the past three months, we saw 28 expired or canceled listings, the majority of which are now in the “active” category. While the average market time for the actives is chiming in at 54 days, you can safely increase that by 10 to 15% to reflect reality.
- Sale prices: Whether they be average, median, or per square foot, recorded sale prices do not reflect seller concessions. And I’m not talking about the “refrigerator conveys” concession. The majority of the contracts we now see involve the seller paying some or all of the buyer’s closing costs. These concessions are generally between 1 to 3% of the sale price, and we recently saw a 6% credit. Who knew a lender would approve that? They did. The bottom line is that a $500,000 sale with a 2% credit is actually a $490,000 sale.
So, before you hang your hat on the last comp, be aware that statistics do not always tell the whole story. Your mileage may vary.
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