A
recent newspaper report based on the annual Central Oregon Real Estate Forecast
points out that the difference in statistical methods of calculating home price
trends can lead to misleading conclusions.
In
a February article the Bend Bulletin headlined that Bend single family home
prices for 2017 had reached an all time high average of $466,926. The
statistics were reported by ECONorthwest which credited its source as
the Multiple Listing Service of Central Oregon database.
For
those close to the real estate market this was not an unecessarily astounding
number. But it nevertheless can create confusion among some homebuyers or
sellers who may have earlier heard that Bend’s prices were still under
$400,000.
The
issue is whether prices are computed as “average” or “median” statistics.
Average is common to most anyone who has passed elementary school math. So 2
plus 2 plus 4, plus 8 is 16 divided by 4 yields an average of 4. But the
same set of numbers yields a median of 3, meaning that an equal number
of these numbers, if you will, is greater than and less than 3.
Percentage
wise, in analyzing larger numbers the divergence of average and median becomes
more significant.
 |
| Source: Beacon Report for 2017/MLSCO |
In
the case of Bend home prices, the gap between the $466,926 average reported by
the Bulletin from the forecast and the year-end median of $395,500 calculated
for 2017 from a report by Beacon Appriasal was 18% - a
dramatic difference.
Many
analysts would prefer median as a more accurate tool, given that a few
especially large sale prices, or lower ones as well, can abnormally skew the
trendline. And the overall median price for a single year is more meaningful
than any individual month.
In
the Beacon Appraisal report, derived from the MLSCO database, the highest monthly median sale price for 2017 was
$418,000 in September, but that dropped to $390,000 in November before rising
to $395,000 in December.
In
other points made in the ECONorthwest report:
- Although home prices continued to increase each quarter of 2017 the price per square showed only a slight rise.
- New home sales had only “minimal” price premiums over existing homes.
- 24% of Bend sales were for all cash without financing.
