For additional “color” on yesterday’s DataQuick report, we pass along a tipster’s summary report of September MLS activity in San Francisco (Single-Family Homes and Condos).
∙ San Francisco Median Sales Price And Sales Volume Continue Declines [SocketSite]
I know that I can be a geek, but I love the anomaly of this month’s condo sales, in which the average price is lower than the median price. It’s almost always the case that some very high prices on the top end skew the average higher, because while the top of the range in infinite, the bottom can’t be less than zero. I expect that legislated BMR units play a role in this unusual statistic in bringing down the average.
Am I just stupid or do these “median price” declines not necessarily tell the real story. Can you assume that values are declining just because the median has declined?
The median price can show a decline for no other reason than the fact that fewer higher-end homes sold and more lower-end homes sold in a given period… that would send the “median” lower, riiiiiight? Just because the median has fallen, doesn’t necessarily mean that VALUES are falling, riiiiiight???? Do I have this completely wrong?
You can slice and dice it in many ways, but the bottom line remains the same: real estate values are falling across many parts of the country, including the Bay Area and even the city of San Francsico. I just don’t understand why it’s so hard for people to accept this despite statistical and anecdotal evidence from many sources?
“…real estate values are falling…even [in] the city of San Francsico. I just don’t understand why it’s so hard for people to accept this…”
Uh, maybe because home prices have remained pretty stable, at least in San Francisco? The MLS data on both SFR and condos, and the Dataquick data on existing SFRs show that prices increased, compared to a year ago.
That’s not to say that prices in San Francisco won’t fall in the future, or that sellers won’t have to cut prices in many cases for a quick sale. It’s just that what we’ve seen in SF so far is a slowdown, not a crash.
What’s your definition of stable? To me it means flat or appreciating at a constant rate. Per the NAR and other threads on this blog, SF prices historically appreciate at 7-8% per year. In the past few years they’ve shot up at 18-20%, so almost 3x the historical rate. Not exactly stable. If the 7-8% is still accurate, values either need to fall or stay flat until incomes catch up.
Medians are not prices. Medians measure what people are SPENDING. When you have a drop off of sales, everyone moves up. They spend the same amount as they would have last year, but they get a better house. Generally, unless wages fall or unemployment rises, medians almost always go up, even if prices are falling.
What medians DON’T tell you is what comparable prices are doing. IT NEVER WILL TELL YOU THIS. The socketsite article about a home that is beng offered for last year’s price is a better indication. There too, last year, you’d get no contingenies or concessions from the seller. So even if that place “sells” for its listed price, the givebacks and contingencies will probably mean the price is off by 5% or so.
That’s if it sells for asking.
Agree 100% with tipster. I sold a place last year “as is” after getting six offers the first week… doubt I’d be able to sell it “as is” at the moment. How do you quantify the monetary value of that difference?
What would be interesting to hear is the perspective of realtors like you. I’d wager there are plenty of agents that read this site – what’s your anecdotal read of the market from being out in the field? Any predictions for home values?
Personallly I think we need to wait a while longer to see more of a drop in prices. I believe that about next year, a lot of people who took out adjustable mortgages and other “creative financing options” are going to find themselves in a tough spot when they need to refinance their ARM and their property is appraised for less than their 100% financing. Those who were already fully leveraged at the point they took out the mortgage are going to have to sell because they can’t afford the payments once the ARM actually adjusts. In that case they won’t be able to afford to overprice their property because they’ll need to unload it quickly. Well, maybe I’m dreaming but since I’m on the buying end, not the selling end, that’s my best case scenario for me.
“What’s your definition of stable?”
Dictionary.com Unabridged (v 1.0.1)
sta‧ble2 /ˈsteɪbəl/
–adjective, -bler, -blest. 1. not likely to fall or give way, as a structure, support, foundation, etc.; firm; steady.
2. able or likely to continue or last; firmly established; enduring or permanent: a stable government.
3. resistant to sudden change or deterioration: A stable economy is the aim of every government.
4. steadfast; not wavering or changeable, as in character or purpose; dependable.
Prices in SF have been flat (stable, showing little change) for the past year. I agree that 20% annual appreciation is unsustainable– and that kind of appreciation historically tends to be followed by periods of periods of flat prices or declines, as incomes catch up. Interest rate increases or economic declines have been associated with past real estate price declines, though, and its not clear whether we’ll have either in the near future. If the local economy continues to improve and interest rates stay low, I think this pause will be brief and shallow. If we have either a new recession or a run up in interest rates, then we’ll see significant declines.
I still haven’t seen an answer to my question about “median” prices. I think that the focus on where median prices are skews the real story because it can simply be a function of the TYPES of housing that sold in a given month. Okay, so what if higher-end buyers are taking a break and higher-end housing is not selling at the pace it was a year ago, and, conversely, more lower-end housing is selling, thereby skewing the median lower. That does not mean, in and of itself, that prices are falling, right?
And don’t give me more lip about having my head in the sand. I’m simply inquiring about the veracity of citing median pricing as a measure of pricing trends.
Not a Math Wiz…Tipster makes good points about median prices that can help you interpret what the median “means”, depending upon market dynamics.
Of course there is a mix of product from month to month, and so the median may not be strictly comparable. However, given the relatively large number of sales in any given month, the supposition is that the median does give you one metric of what the market is doing. The “median” property (size, condition, etc) is probably not HUGELY different from month to month given the number of data points. The movement of the median is therefore generally related to moves in home prices.
That said, as has been stated here several times, the best “comp” is a resale of the same property. That’s why our kind webmaster keeps posting properties that have sold in the recent past, and are now up for resale. Or, barring that, units in the same building that appear to be similar. But that is difficult: you always get into questions of “oh, the owner put in a new kitchen”, or “unit 1A’s views are better than 1B’s”
So, flawed though it is, the median price provides valuable information, and it is easily available (dataquick and others calculated it monthly from public records). So it’s something to look at, and interpret in light of what else is happening in the market.
Thanks, curmudgeon! It should also be said that, when the median price adjusts by a mere 2.2% year over year, it doesn’t necessarily indicate a pricing trend. The 2.2% variation could simply represent a different mix this month vs. last year.
It just drives me CRAZY when people see this kind of data and conclude, “Oh My God! Prices have DROPPED 2.2% from last year! The end is nigh!”