We hear stories on Radio and TV or see article in the newspaper that cite trends about what is happening in the real estate market. At least a couple of times a year local newspapers print in depth articles including a lots of statistics and quotes from experts. The statistics seem to catch everyone’s eye and the buzz around the water cooler is about how the market is performing, how much property values have gone up or down and my favorite, the average price per square foot for houses.
While taking a statistics course a professor said, “Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital”. The problem with statistics is that most people don’t understand what they mean and then try applying them to their individual situations.
Think about it, you see the following statistic, the average weight, lifted by men, at the gym is 600 pounds. You figure, I’m average and try to lift 600 pounds. After a quick trip to the doctor to have your arms reattached you learn that the average was based on four guys; Superman, Hercules, The Hulk and Atom Ant. The moral of the story is averages don’t mean anything to you as an individual and that unless you know how they were calculated they can be pretty dangerous.
The following statistics were printed August 3, 2009 in the New Orleans Times Picayune. The data was reported to be supplied by MLS to Real Property Associates a firm run by my former professor and friend Dr. Wade Ragas. The data is for Zip Code 70057, the small community of Hahnville in St. Charles Parish.
Average Price/SF for 2007
Average Price/SF for 2008
Average Sale Price for first Half of 2009
% Change $/SF from 2008 thru first half of 2009
$111/SF
$121/SF
$93/SF
-23%
Using the statistics report provided through MLS, the following are the results indicated for the same time periods;
$113/SF
$103/SF
-7.2%
We don’t know exactly how the two analyses differed but we can see the difference in results. If we clean the data up just a little, by taking out properties that were not typical of the market or adjust for seller concessions, based on the MLS program, the decline is only about 3%. If we then compare just the first half of 2008 to the first half of 2009, we actually see an almost 1% increase.
So what does it all mean? Not much to start with there are so few sales in the area, the statistics are statistically not reliable. With just a little change in the analysis the answers vary widely. Statistics are great for identifying trends in the overall market but they can be misleading if you want to know what’s going on in your back yard. If you need to know the value of your home call an appraiser, if your are trying to buy or sell a home hire a qualified Realtor.