By Bruce Cathcart
Yes it’s true! The average home sale prices in the Coachella Valley are up over 100% when compared to the average home sale prices for homes sold in the Coachella Valley in 1983. But who cares? The statistics don’t lie, they just get manipulated. And the “presstitutes” today will say almost anything and manipulate the data to grab a headline that will get our attention and force us to read on just to see if there is a meaningful point to their sometimes outrageous claims.
Hardly a day goes by without seeing something in the news about home sale prices. This week’s article will help Coachella Valley Weekly readers to interpret home sale data in three easy steps. I call it Time, Area, and Type or TAT for short. Looking at the example above the first thing we want to know is for what time period are home prices up over 100%. Are they up overnight, or over last month, or over the last year (sometimes referred to as year-over-year when you compare the data for say March of 2013 to March of 2012)? In our example, home sale prices are up over the last 30 years and unless we are looking at making a very long-term investment in real estate that information is not likely to be very helpful. Next we want to look at the area for which the claim is being made. In this case it is the Coachella Valley and that information is far more significant to us than say home sale prices in South Dakota! Finally, what type of sale price are we talking about here. Home sale prices are the prices that sellers are actually getting when their homes are sold (as opposed to list prices which are the asking prices that sellers are hoping to get if they sell their home). The data most commonly associated with sale prices are either the “average” sale price (where all the prices are added together and then divided by the number of homes) or the “median” sale price (which is the price at which half of all the home sale prices are higher and half are lower). Average sale prices are most significant when a small area is used like a single neighborhood or a gated community or even a slightly larger area where all of the home sale prices are very similar. The median sale price is used more frequently for larger areas like Riverside County, or the state of California or even the nation, where home sale prices vary by a great amount. The median sale price is significant mostly to point out a general “trend” (which is a general direction) in which home sale prices are going. In the example above we see that the “average home sale price” is up over 100%. This tells us that the average home sale price in the Coachella Valley when compared to the average home sale price 30 years ago in the Coachella Valley has more than doubled. That’s good information if you have owned an average home in the Coachella Valley for 30 years, but not really meaningful. It’s more just a fun fact.
So let’s put the TAT to the test. Two weeks ago the desert daily newspaper ran the front page headline in big bold print “Home prices rise 17.9% in March”. My first reaction was YIKES! But a quick scan of the article told me that the year-over-year (TIME – last March sale prices compared to sales prices this March) in the Coachella Valley (AREA) median home sale price (TYPE) had jumped 17.9%. Knowing the TAT tells us then that the general trend for home sales is up approximately 1.5% each month for the last 12 months in the Coachella Valley. While this is certainly good news for home owners in the Coachella Valley, once we apply the TAT it is not as shocking as the headline initially leads us to believe.
This week’s real estate tip: Median home sale prices can show you the general trend or direction that sale prices are going, but the average sale price for homes in your neighborhood will give you a better and more relevant indication of the general value of your home. For a specific value for your home contact your local real estate broker or agent and ask for recent “comparable home sales”. This is a free service provided by local brokers and agents.
Bruce Cathcart is the Broker/Co-Owner of La Quinta Palms Realty, “The Friendly Professionals” and can be reached by email at firstname.lastname@example.org or visit his website at www.laquintapalmsrealty.com.