Wednesday, November 7, 2007

Is it time to buy?

"Home prices down again -- is it time to buy?" http://seattlepi.nwsource.com/business/338526_housing07.html is the headline on the front page of Wednesday morning's P-I. It's a fair question and the article does a good job of presenting lots of statistics There are, however, a couple of aspects of the article that I find to be potentially misleading.

First, is the practice of quoting statistics relating to median prices rather than average prices. I suspect that many people confuse these two terms. Median price, as you know, refers to the price point at which half of the homes on the market fall above and half fall below. Average price, on the other hand, is calculated by adding the sales prices of all the homes sold and then dividing that figure by the total number of homes sold (during a particular period). The average price is therefore closer to the amount the "average" consumer (i.e. the largest percentage) can expect to pay, which is why I think it is a more useful figure. The median sales price will typically be lower than the average sales price.

Related to this is the practice of comparing median prices from last year to median prices for this year. If more lower priced homes (e.g. townhomes and condos, which typically sell for less than single-family homes) are sold this year as compared to last year (and there were), the median price will necessarily go down. That is not the same as prices going down.

On the other hand, the average sales price in King County has declined slightly (approx. .003%)for each of the last two months. Here are the figures:

Average Sales Price of Homes in King County, 2007

March: $478,728 April: $483,814 May: $493,226 June: $496,258 July: $501,689 August: $504,036 September: $502,381 October: $500,800

No comments: