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Reading the numbers

Kevin Boer, Broker Owner, 3 Oceans Real Estate, Inc. ()

August 28th, 2006 · No Comments

Sensationalizing the news probably makes good business sense, since it attracts more readers. Media coverage of real estate news is no exception. “The sky’s the limit” theme of many real estate articles of a year ago has largely morphed into “the sky’s falling!”

Search hard enough, and you can find the numbers to support pretty much whatever case you want. An extreme example: as this graph clearly shows, prices in Atherton increased by 70% from April to May, 2006. Imagine the headline on that one! But for those of you who are disappointed that you now can’t afford a home in Atherton, there’s hope…the headline in July 2006 is that prices have decreased by 50%!


Rollercoaster prices in Atherton make for two juicy headlines

So what’s the message? Three things:

First, keep in mind the source’s bias. Media? Probably trying to sell more newspapers. Real estate professional (like yours truly)? Hmm….maybe trying to sell more real estate.

Secondly, ask if the amount of data being analyzed is enough to warrant a trend. Atherton is a small, fairly exclusive city, and in a typical month there are only eight or so transactions; in a slow month there may only be two or three. You can draw far more accurate conclusions from larger data sets; for cities like Atherton, you probably want to compare consecutive quarters, or even half-years.

Thirdly, look at the metric being used. “Average” is often not a good one since a handful of particularly high numbers can skew your perspective. In the Atherton example above, much of the April to May rise came from four particularly high sales ranging from $8 million to $13 million. A better metric is usually the median.

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