I recently received an email from Christoper Hain of Terra Firma L.A., which caused me to view the chart below. Often people try to take general median percentages and apply them in the wrong place.
The current median 12 month change in King County is down 12%. But if you get a house for 12% less where it is down 30%, that’s not a great buy. If you get a house for 12% less where it is only down 7%, that’s a good (not great) buy.
Chris’ article drives home the point that in one agent’s “service area”, which is not really very big, there are areas down 7% vs. 42%…HUGE SPREAD!!!
Plus he asks the question that is not discussed often enough:
“You could read either end of this chart in completely opposite ways. Perhaps, the ones that have fallen furthest are the ones you want to buy in 2009. Or perhaps, the ones that have held their value best are the ones to bet on long-term.”
I’ll be doing some neighborhood breakdowns for Seattle and Eastside today, and finding our highs and lows in my service areas. I’ll post a graph similar to the one for L.A. below, as related to our immediate area.
Look at Beverly Hills, as example. Even in that small area (which due to the TV show most think of as 90210) there is a variance in % down for the three different Beverly Hills Zip Codes of 90210, 90211 and 90212. Big difference between 24% down and 42% down…in one small area.
I’m going to try to do the neighborhoods accurately, vs. Zip Code. i.e. Wallingford, Green Lake, East of Market, West of Market, etc… I have to use a polygon search feature for that. It’s time consuming, but given this is still “the holidays”, now would be a good time for me to expend the excess effort, and the results will be of value in tracking changes during 2009.
7% down to 42% down…it boggle’s the mind. Here’s Chris’ chart:
Housing prices down 7%? or 42?
Agreed. It pays to read carefully when reviewing statistical data, since it can be easily manipulated.
I always thought it would be interesting to compare prices area by area to see if prices unwind the same way they went up. That the areas that went up the most also come down the most. I’ve always suspected that’s true, but I haven’t bothered to look.
Magnolia has been hit pretty hard in this market, and if I had to guess, if and when the market comes back, it probably will come back pretty strong.
Kary,
I can’t add that in to my current project because I have to use polygon to get accurate info by neighborhood. But when I’m doing zip code again vs. neighborhood, I’ll add that request in.
Probably when I do the 4th quarter and year end stats around the 8th of January. I like to give agents a week or so to post their month end closings.
Why is it that you never “bother” with doing stats? Aren’t you curious? I know it killed the cat, but we have so much data at our fingertips. Consumers would die to have what we have…and yet so many don’t use it.
I look at various stats a lot. It’s just that I haven’t done that particular project.
it is worth the extra effort to do the polygon search as opposed to the zip code. When I search just in my area of Coconut Grove I get completely different numbers with different statistics. For us it is especially true because the area outside of Coconut Grove is mostly condo foreclosures…in the hundreds.
Riley,
Definitely yes. Worlds of difference, but not for the reasons you have stated. More like one neighborhood in the zip code is close to Lake Washington. Another in the same zip code is close to the 405. Huge difference in pricing.
i agree, 12% off in a market that is currently 30% down in’t too great of a deal
Zip code differences aren’t the worst of it. Case Shiller data just came out, and it’s not terribly useful because it consists of at least three counties. The NWMLS county numbers aren’t all that useful, nor typically are the area numbers. Sometimes just being on one north or south of a certain street makes the difference.
I have a statistics question. Why does the county wide median seem to frequently decline as the month goes on? Do people buying less expensive places tend to want to close on the end of the month?
Kary,
The last days of December were pusing the median price up. There was a significant jump up in just two hours a few days ago, UNTIL I boiled it back down to price per square foot. That’s why price per square foot is important. One big sale near the end can throw the median into a different ballpark.
But assuming your assumption is correct that the price narrows down near the end, then yes, closer to month end closings being lower price could be the rationale.
For the benefit of readers (I know you know this, Kary) END OF MONTH closing cost less in out of pocket “closing cost” needs. If lenders go back to not wanting the seller to pay PREPAIDS this is going to be a very big issue.
The amount of interest paid at closing is increased by each day earlier in the month that you close.
Kary,
I would think that people who close between the 5th and 12th are not at all worried about cash issues, and may be higher sales. But another contributing factor is the large volume that close near the end. I would guess that 75% of all closings in a month happen in the last two weeks vs. the first two weeks. But I’d have to test that to be sure. The sheer volume would push the median toward…the actual median for the month.
Have my hand in about 8 things at once here. Hope that answered your question.
Thanks for the answer. We always try to avoid end of the month closings so I don’t really understand what drives them. Occasionally I’ll see the numbers go up at the end, but much more often they go down.
BTW, one big sale at the end of the month could affect the mean, but not likely the median.
Also, on the price per square foot issue, yes that is important. In my little neck of the woods (Fairwood) the mean and median are not that different than last year, but the houses selling are about 10% larger. Just looking at the mean or median would be deceiving.
LOL…we’ve had this “discussion” before. Median was $410,000 and jumped to $415,000 within a few hours. Tthe MPPSF went from $188 to $190. That was a couple of days ago. Not sure where it is now. I’m waiting until after the holiday.
“We always try to avoid end of the month closings” Who is “we”? If my client is short on cash, especially now that they need more downpayment, I try to close no earlier than the 25th and as late as possible. The difference could be their moving money.
I fully expect lenders to go back to true Closing Costs only (without warning), and no seller contribution to “prepaids”. So be careful on that “we don’t” stuff. You clients may need the extra bucks for curtaiins or a new doormat 🙂
Yes we have had that discussion before. It was at 405k just a while ago.
I guess my clients don’t push things as close as yours. There just seems to be less issues closing sometime other than the end of the month or end of the week, although with refinances being such a big thing now that might not matter as much. But more often the decision is based on other factors. They often want to do something with the place before moving in, and need time to do that. Or they just don’t want to wait.
Surprisingly it almost never seems to be based on wanting time to move. For me that would be a big factor, but I hate moving.
Very well put. It seems much of the housing data these days is very misleading…. one must not rely on an article or two for accuracy.
Now it’s down to 400k, but volume is over 800, which is more than the unofficial number from last month.