Reading Between the Lines on Real Estate Sales

The year is almost at a close and the real estate market has had its share of ups and downs. From recovering home values to upticks in mortgage interest rates, we have passed over plenty of headlines to make our heads spin. For anyone that has bee interested in either buying or selling a home around La Jolla, you’ve probably been paying close attention to the information. You’ve probably seen the recent rise of the real estate market for the first time since the housing crash in 2007-08 (In fact, 2013 has been a tide-turning year for the industry).

Understanding Real Estate Information

However, the data behind these headlines have continued to elude a majority of buyers and sellers. The average resident rarely looks at the source and background noise that constitutes each of these articles. But for agents, it’s the one thing that matters when conducting real estate transactions. Yes, home values are strengthening, but does that mean your home should priced above market level? When conducting research, what if a neighborhood or city, like La Jolla, is incorporated with a bigger metropolitan area such as San Diego? Tiny details like these matter, and agents are always taking these into consideration when representing a client.

To get a good grasp of what all the data means, here are some key aspects you should look at:

1. What is the Source?

Is it a national, regional or neighborhood statistic? Does the source have a vested interest in the outcome? Statistics should be neutral in nature but can easily be manipulated.

2. Median vs Average Price

Average is the sum of sales prices divided by number of sales. Median is the same amount of sales above and below. Understanding this can help determine if a large sale or small sales are influencing the average.

3. Sales vs Prices

Sales are number of transactions and prices are the change of prices within the transaction. If there is only one sale, but it is 50% higher than the last sale it may not be enough to mean the whole neighborhood is up 50%.

4. Sample Size

Are there enough sales used to truly extrapolate information for the overall market?

5. Sales Price to Live Price

This is an interesting number in San Diego that shows on average what homes sell for compared to their list price. However, if a home is listed at $1,000,000 and then reduces the price to $900,000 and sells for $875,000 it will show a 97.2% LP/SP although at $1,000,000 it would have been 87.5% SP/LP.

6. Days on the Market

This number shows the velocity of the market and how quickly homes are selling. Lower inventory usually leads to shorter days on the market.

7. Year-Over-Year vs Year-to-Date

Is the statistic for Year over Year or Year To Date? YOY is from November to November whereas YTD is calendar year January to Now.

8. Trends

This is when we take the same information and apply it to different times. Experts might try to predict likely outcomes in the market from 30 days to 90 days. They’ll look at the trends between prices, averages, inventory, and days on the market to see where things might head.

9. Active – Pending – Sold

We compare active listings, pending listings, and sold properties over a set period of time to determine how the market is trending. If the average sold price was $800,000 90 days ago, but the average pending is $850,000 and average list price is $900,000 one could expect the market it trending up. You then compare this with inventory and days on market to see if it tells the same story.