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Statistics Are So Confusing!

I was talking with someone about real estates sales and prices recently, and they said, “I see that home prices are up 10%.” I asked, “Compared to when?” They weren’t sure. Then I asked, “Where?” They didn’t know, but in their mind that statement from some news report said their house was worth a lot more money now. Why can’t you depend on the numbers in a 2 minute news report? Let me show you with the latest stats

April & May 2013

May 2012 & May 2013

January - May 2012 & January - May 2013

April 2013

May 2013

% Change

May 2012

May 2013

% Change

YTD 5/31/2011

YTD 5/31/2012

% Change

Bellingham
Units Sold

93

110

18.3%

82

110

34.1%

305

304

-0.3%

Avg Sold

$342,701

$363,183

6.0%

$306,478

$363,183

18.5%

$309,385

$309,641

0.1%

Median Sold

$315,000

$299,950

-4.8%

$258,700

$299,950

15.9%

$271,000

$267,500

-1.3%

Total Whatcom County
Units Sold

182

229

25.8%

189

229

21.2%

651

730

12.1%

Avg Sold

$300,155

$297,641

-0.8%

$271,240

$297,641

9.7%

$271,560

$265,801

-2.1%

Median Sold

$272,500

$258,500

-5.1%

$240,000

$258,500

7.7%

$248,000

$239,000

-3.6%

So did our homes prices go up or down in May? Obviously, it depends. The median sale price in Whatcom County as a whole was down 5.1%...but it also was up 7.7%. A number means nothing by itself…it is the context that gives it meaning. So when you see a real estate price or sales statistic, ask the meaningful questions of where, what and when to establish the context. So what does the table above tell us? First, we need to clarify the “what”. The Total Whatcom County numbers include Bellingham, and Bellingham accounts for approximately 50% of those sales. In May, sales in the county increased faster than sales in Bellingham, but average and median sale prices did not. While the relative number of county sales dropped off in May relative to May of last year, they have been stronger overall during the past 12 months than have sales in Bellingham. Pricing, however, is a different story, with average and median prices in Bellingham rising higher or falling less than any comparable period for the county as a whole. All of this brings us to a discussion of why prices seem to bounce around so much. A good example is the percentage change in average price from April to May in Bellingham (up 6%), relative to the change in median price over the same period (down 4.8%). The table below explains this.

May 2012 Price Ranges in $1000s

Total Sales Volume

Total Units Sold

Average Sales Price

% of Market

Changes in May Year to Year Distribution of Residential Sales in Bellingham

<300

$11,279,020

52

$216,904

63.4%

300 to <500

$7,503,700

20

$375,185

24.4%

>500

$5,598,500

9

$622,056

11.0%

>750

$750,000

1

$750,000

1.2%

May 2013 Price Ranges in $1000s

Total Sales Volume

Total Units Sold

Average Sales Price

% of Market

Unit change

Average Price Change

<300

$12,436,530

55

$226,119

50.0%

5.8%

4.2%

300 to <500

$13,561,843

35

$387,481

31.8%

75.0%

3.3%

>500

$8,826,750

16

$551,672

14.5%

77.8%

-11.3%

>750

$4,625,000

4

$1,156,250

3.6%

300.0%

54.2%

First, let’s all get on the same page with a quick math review.

• Average is the total of the sale prices of all the properties sold, divided by the number of properties sold.

• Median is the sold price in the exact center of all the sold prices. Consequently, if more homes are sold at a higher price point (look at the table above and compare the number sold above $300,000 in 2013 (55) relative to the number sold above $300,000 in 2012 (30), it makes sense that the average and median prices are higher. In this case, as per the first table, the average price of a Bellingham home increased 18.5% and the median price increased 15.9%. Did your house or mine go up between 15% and 18% over the past year? No.

And if you are still hanging in there with me, I’ll get to the point.

Statistics, whether from me or a famous economist, will not tell you what your house is worth. They are useful in understanding where a market has been and, sometimes, where it is going, when tracked and compared over time. The data you need when pricing your house to sell or buying a house is from the houses closest to yours in location, condition and time which have actually sold. That is your market. Why do we track statistics? Because we want to know the future, and they help us develop a picture of what that may be. So what is the crystal ball saying this month? Indications are the market will continue strong but spotty. Current inventory levels in Bellingham for this time of year are lower than any time since 2005, while pending sales are higher. Through May, over 45% of the homes sold in Bellingham were on the market 30 days or less. That compares to 34% sold that quickly during the same period in 2006, when our crazy market started. Interest rates are rising, but they are still historically low. Financing is actually getting a bit easier, and there are 5% & 10% down payment loans available. People from other areas are showing up as buyers again, now that they can sell their homes elsewhere. There are some downsides. Appraisals are much tougher. For the first time in years, I have had appraisers ask for inspection reports because underwriters want them. Underwriters are also requiring documentation for the source of the down payment money and sometimes requiring financial reserve amounts of the borrower. Buyers are getting frustrated because of the competition for homes of certain types. Sellers are getting frustrated because they may still have to bring money to the table to sell. And there are still homes that go off the market unsold, or sit on the market for months, because the price is too high for the product.

For details, charts and tables of numbers on all the Whatcom County market areas, go to www.JohnsonTeamRealEstate.com. We update the site weekly with everything from interest rates to market conditions. Also, feel free to call us at (360) 303-2734 or e-mail Info@JohnsonTeamRealEstate.com if you want to know more about a specific portion of the market – we track a lot more than we have space to report.

If your neighborhood would like a presentation or a link to your website of up-to-date information on real estate in the neighborhood, we can provide it – just give us a call. www.JohnsonTeamRealEstate.com also includes a constantly updated list of newly listed properties and a list of properties being offered as short sales & foreclosures (REOs), as well as the entire listing database of the Northwest Multiple Listing Service, fully searchable to your specifications.

www.JohnsonTeamRealEstate.com also includes a constantly updated list of newly listed properties and a list of properties being offered as short sales & foreclosures (REOs), as well as the entire listing database of the Northwest Multiple Listing Service, fully searchable to your specifications.