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Tim Freund's Blog

By Tim Freund, CRS, | Broker in 91362

Playing With Numbers

In my real estate office, my manager regularly gives us an excel spreadsheet detailing the numbers of sales year to date as well as the inventory. It’s broken down by month, has data at various price ranges and provides the all important historical framework from which to assess our current market.  Like the stock market or any statistical analysis for that matter, the numbers are subject to interpretation.  For example, remember back to February 2009.  The Dow Jones Industrial Average had dropped to around 6,500.  If you asked yourself, how much of a decline your portfolio had experienced, looking from the recent top of say 13,000, your portfolio had lost approximately 50% in value.  However ask your broker how much your portfolio would have to rise to recoup that money and he would tell you, your portfolio would have to go up 100%.  In other words, 13,000 to 6,500 is 50% but 6,500 to 13,000 is 100%.  Numbers… Bedeviling little buggers aren’t they?  So it is with real estate.

You’ve heard time and time again, and please believe it because it’s true, real estate is a local business.  What is happening in Las Vegas has very little bearing on what is happening in Atlanta, and what’s happening in Phoenix, has little effect on Westlake Village, Ca.  As I troll through the numbers my manager provided for our local market, what jumps out is consistency.  In fact the closed sales number for this week in November are very similar t0 those of the past 6 years – from 2005-2010 this includes those peak years or ’05 and ’06  “No way!” you say; “Way!” says I.  Here they are for the Conejo Valley for the 1st week in November: 2005/30; 2006/36; 2007/25; 2008/36; 2009/53 (an exception due to the expiring tax credit round 1); 2010/27; an average of 34.5 (30.1 if you exclude 2009).

So why lead in with the DJIA figures?  If you, as I’ve suggested, exclude 2009 because of the a fore mentioned tax credit expiration as an anomaly, the spread is between a high of 36 and a low of 25 with this year at 27 closed sales for the 1st week in November.  Put in percentages, 2010 is off 25% from the high, but the high is 33% higher than today; get it?  In other words, do we look at the numbers from then to now or now to then? – it makes a huge difference.  It’s not that the numbers lie; numbers don’t lie, but really about how you read them.  By the way, if we were to exclude 2009 and use the average of 30.1 closed sales in November as compared to this year, we are only 10% lower now than the average; err, or is it that the average is 11.5% higher than we are today?  Either way you play with the numbers, the market looks historically consistent.  And that is a bit of good news.

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