HERE IS SOME HELPFUL INFORMATION ON
HOW TO WORK WITH MARKET STATS
Sellers and homeowners have a insatiable appetite for information about the
housing markets. What are prices doing, are they up or down? Is it a
Seller's or Buyer's market? Is now a good time to sell? Reports and
newspapers provide some useful answers, but the information is usually hard to
interrupt unless you understand what figures they are using and how to correctly
use them. What is a "median price"? What does "seasonally adjusted" mean?
Who understands "the unsold inventory index?" or how do you accurately determine
"Days on The Market"?
To help you follow the numbers, here are some helpful definitions:
Median Price:
An often used indicator of the strength and direction of a housing market, a
median price is the midpoint of all the prices of homes sold in a given area
during a specified period. Mid point means half the homes sold for higher
prices and half the homes sold for lower prices. The median isn't the same
as the average, which would be calculated by totaling all the prices and
dividing by the number of prices. The median price can be affected over
time by the characteristics and sizes of homes sold as well as price trends.
For example, if a market shifts from starter homes to luuxury mansions, the
median price will increase even if homes are not appreciating in value.
Seasonally Adjusted:
Housing markets are naturally more active in the spring and summer months
because people prefer to move during the longer warmer days and between school
years.That pattern means it's difficult to make meaningful comparsions between
results for different months or quarters of the same year. To overcome
this hazard, economists statistically tweak the reported number of homes sold
during various periods to reflect seasonal variations. The tweaked numbers
are noted as "seasonally adjusted."
Price Discount:
The "price discount" is the percentage difference between the Seller's
initial asking price and the actual purchase price of the same home. For
example, if a home was priced at $300,000 and sold for $291,000, the discount
would be 3% (percent). Price discounts are usually reported as an average
for a set of home sale transactions. A small percentage, on average, means
the market favors Sellers, while a large average discount signals a
Buyer's Market.
Unsold Inventory Index:
This index which indicates the pace of the market, is calculated by
measuring how long it would take for all the homes currently on the market to be
sold at the current rate of sales. A smaller index is a positive sign for
Sellers, while a larger number is good news for Buyers.
Affordability Index:
An affordability index measures whether a typical family can qualify for a
standard mortgage to purchase a typical home. A "typical" family is
defined as one that earns the median income in a given area, and a "typical"
home is defined as a median -priced single-family house in the same area.
An index value of 100 means a median-income family has exactly the amount of
income needed to purchase a median-priced home. A number higher than 100
means the family's income is more than adequate, while a number less than 100
means the typical family can't afford to buy the typical home. These are
sometimes converted into percentages that look like this: "28% affordability",
means 28% of the working household earn a medium income and can qualify for a
medium home, given a normal set of financing parameters such as 20% down, 30
year mortgage at 6.5% interest and qualifying credit.
Days on The Market:
"DOM" measures the actual number of days a property has been actively for
sale. Sounds simple until you consider the variables. Are you
looking at the number of days from a given agent? What if three different
agents had it for sale. You also need to look at how many days at its
current price? What if it had several price reductions and was put up as a
new listing each time. In fact all are relevant time lines to consider.
