It seems like at least 2-3 times a week we see or hear a headline like this that is representing that real estate VALUES have dropped a percent or two in our neighborhoods. The BLUNT REALITY is that real estate prices in your neighborhood have dropped much more than that.
Webster says:
MEDIAN
Function: noun
Etymology: Middle English mediane, from Late Latin mediana (vena) median (vein), from feminine of Latin medianus in the middle, central, from medius middle -- more at MID
1 : a medial part (as a vein or nerve)
2 a : a value in an ordered set of values below and above which there is an equal number of values or which is the arithmetic mean of the two middle values if there is no one middle number.
So what we are having reported is that the "center point" of the actual homes sold has moved lower. The truth of this statistic is that it probably has little to do with values, and the rise or fall of them. Let's consider two examples;
#1
Median price in Anoka County fell from $250,000 to $247,500 in a period. It will be reported that home values have dropped 1.0%. All the statistic actually indicates is that an equal number of homes were sold above & below $247,500. If all these homes had APPRECIATED in value 10% during the measured period, the report is unchanged. Conversely, if all these homes DEPRECIATED 10% during the measured period, the report is unchanged. And truthfully, there is not yet a way to measure either of those two scenarios.
#2
A new housing development opens up in Blaine like Club West. The builders pre-sell 40 units, and then start construction on another 60 units. By the time the pre-sold units are completed and ready for occupancy, the builders have signed 25 more contracts. Over a short period of maybe a month or less, they will actually CLOSE on 65 units at an average price of $185,000. This one community alone will force the MEDIAN price for Blaine down drastically - remember, the median indicates that an equal number of homes were sold above and below that price line. Property values in Blaine may be drastically rising, falling, or level, and you would not know it from the MEDIAN reporting.
MESSAGE: Median price is not anything what the general media represents it to be. It is clearly trying to show what is happening to values, and there is no way it can do so.
LESSON: Be careful what you accept at face value. Dig deeper. Ask why. Ask why again.
OBSERVATION: Even allowing that "what bleeds leads", the media cannot report the reality of the price drops that have occurred in the marketplace. They are not using the correct tools to assess the facts on the ground. They have represented that it is in the 1% - 3% range but it is probably closer to 10% - 15% range for our local market. As a seller of 75 new and used homes annually, I know by real closed sales what the facts are.
I invite comments on this post - agree or disagree?