Avg sales price -11.3%; Median sales price 6.8%; price per sq. ft -37.9% y-o-y. How can these figures vary so greatly in 1 zip code?

Asked by Sara Elich, Scottsdale, AZ Tue Apr 17, 2012

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Jim Paulson, Agent, Boise, ID
Sun May 13, 2012
Remember the old saying figures don't lie but liar's figure? Trying to look for simple answers to complex questions leaves people looking for the .4 child since the "average" American home has 2.4 children. LOL

However, mean, median and mode''s are all different "averages" but each tells a different story. Think of a bell curve and standard deviations. Most things fall within "one standard deviation" when you get past 3, you are dealing with extremes. In real estate, the extremes are the luxury market on one end and distressed sales on the other. When you throw out the highs and the lows and deal with the masses in the middle, those numbers tells me the market is improving so the extremes will become less extreme over time.

Another major factor is the accuracy of the sample. In a single zip code if two luxury homes sold one month and non the next, the average "price per square foot" will appear to have tanked because of the small statistical sample.

I have taken many statistics classes, economic classes etc., and have to admit most online valuation models will never be as accurate as an appraiser who personally looks at the home, the neighborhood, the quality, etc., and hand picks comparable s that are in fact comparable. For example, how can anyone effectively write an algorithm to estimate views. How much more is a home worth if it is next to a park verses next to an adult film store? How would an online model know if your home smells of pet odor and gross carpet verses had beautiful hardwood or tile floors?

Remember, these sites are just to give you a rough idea.

Hope this helps!
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Ken & Debra…, Agent, Scottsdale, AZ
Wed Apr 18, 2012
Hello Sara and Robert,

The previous answers are in my opinoin all right on the money.

All I can add is this Market Report I put together for Metro Phoeinx most of which is information dirived from the Cromford Report that was mentioned by Jason earlier.

Here is a link to the report. http://www.youtube.com/watch?v=pzgULwKlNcs&feature=related

If you have any questions, please don't hesitate to let me know.
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Cynthia Sweet, Agent, Scottsdale, AZ
Wed Apr 18, 2012
Average sale price isn't as good an indicator of what is going on in an area because an extremely high or extremely low sale price can skew the results. Median sale price is a much better indicator because it is the price where half the homes, by number not amount, are above and half the homes below that price. Average price per square foot has the same problem as average sale price...any home that is dramatically different in price from the majority of the homes will skew the results.
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, ,
Wed Apr 18, 2012
Hi Sara, Robert,
Part of what may be happening is that the stats tell different things. The dip is avg. sales price and price per sq ft are consistent. If price is going down, typically price per sq ft would also. The median is not a numerical average, but a volume midpoint. So half the sales are lower than median price, half are higher.
If I had to interpret the data, I'd say buyers are taking advantage of a "buying" market and picking up higher priced homes at a bargain. But that said what I'd guess is going on is similar to what's happening down in Tucson. The selection of lower priced homes is minimal and buyers who want to take advantage of the market are having to go higher in price.
The above is strictly an interpretation of the stats you indicated above. I'd have to second Jason's caution. It's important to know where the data came from that created these stats. Data can be calculated accurately, but if it isn't based on good collection, it's invalid.
Good question,
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Jason Mcneal, , Scottsdale, AZ
Wed Apr 18, 2012
Average sales price often gets skewed by the luxury market, for better or worse. If you're looking at macro real estate statistics, the median helps to minimize outliers in the data, but the downside to using the median is that its slower to pick up on price movements. Last, but not least, if you pulled your statistics from something Trulia reported, I wouldn't necessarily trust the data. Personally, I don't know about other markets in the country, but Trulia seems completely out of touch with the Phoenix market. If you want up to date statistics on the Phoenix market, Cromford Report is the best source around, but it's a paid subscriber site and it's about $300 for an annual membership.
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