Statistics Beware!

I see a lot of advertisements posting market data and statistics as a way to entice buyers and sellers to enter into the real estate market with a certain company or agent.  The problem with statistics, however, is that they can be manipulated in order to make things appear more or less desireable than they really are.  Statistics can be decieving when additional information is not provided about the sample data used or how it's used.  When the data sample used is maniupulated to make the statistical information look better without providing any explanation or additional information it can be harmful to consumers, the real estate industry, and the people working within the industry.  Consumers beware!

Let's take a look at some market data for Harbor Springs for example.  Our quaint town has had 81 residential sales this year to date (01/01/2011 to 09/12/2011) all within the Harbor Springs school district.  During the same time period last year, there were 94 sales.  Below is a breakdown of the data as it compares year to year:

2011 Market Data - 81 sold - (Harbor Springs school district)

LIST PRICE:
SOLD PRICE:
HIGH LOW AVERAGE MEDIAN TOTAL PRICE
$3,300,000
$9,000
$425,094
$224,900
$34,432,630
$2,400,000
$9,000
$350,054
$205,640
$28,354,440

2010 Market Data - 94 sold - (Harbor Springs school district)

LIST PRICE:
SOLD PRICE:
HIGH LOW AVERAGE MEDIAN TOTAL PRICE
$2,150,000
$56,900
$288,618
$199,450
$27,130,110
$2,000,000
$49,000
$245,458
$175,000
$23,073,085

On it's face, it appears as though prices were trending upwards, but the reality paints a different picture entirely.  For 2011, there were 5 total properties listed at over $1,000,000, and 3 properties listed over $2,000,000.  This offsets the data tremendously when looking at 2010's data where there was only 1 property over $1,000,000, and that same property happens to be the only listed at over $2,000,000 as well.  If anything, the information indicates that more luxury properties are now being listed and sold over the previous year as opposed to prices trending upwards.  Without this explanation, someone could use the info to make it look as though the market were doing substantially better than last year.

Comparing the Data "Apples to Apples."

A search parameter looking at homes within the Harbor Springs school district that are similar to eachother, all within a similar size, condition, and comparable location paints a different picture.  Check out the data comparing the same time periods as before:

2011 Market Data - 2 sold - (Harbor Springs school district)

LIST PRICE:
SOLD PRICE:
HIGH LOW AVERAGE MEDIAN TOTAL PRICE
$279,000
$209,000
$244,000
$244,000
$488,000
$228,000
$201,000
$214,500
$214,500
$429,000

2010 Market Data - 6 sold - (Harbor Springs school district)

LIST PRICE:
SOLD PRICE:
HIGH LOW AVERAGE MEDIAN TOTAL PRICE
$349,000
$149,900
$204,516
$178,000
$1,227,100
$320,000
$138,900
$194,100
$169,200
$1,164,600

This paints a different picture, but it still isn't good enough to really get an idea of how we're doing.  Since our town is very small, and there are very few properties included in our sample, the data doesn't have an opportunity to recover from market anomalies such as a property that sells significantly higher than it should have sold for based upon other recently sold comparables.  Again, this information can be used to make things look better than they really are.  Example: "Average home prices are rising compared to 2010!"  The data appears to indicate this is true, but the sample data used isn't large enough to paint an accurate picture.  Instead, it's used to paint a picture that is advantageous to someone looking to make a quick buck.

Jared Hammond

Jared Hammond

Real Estate Associate & Property Manager
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