Whenever the monthly Orange County real estate sales reports come out showing what the recent sales and median home price were from the prior month I am always cautious on the accuracy of the data. Actually, let me restate that – the data is correct, but is it a true reflection of the real estate market?
Being that the data is pulled only from “sold” properties, is it truly a reflection of the entire real estate market? Is there enough sales to really get a good median price as compared to other months? Is one or two of the sold properties skewing the median price up or down?
Just like a few years ago when all the new million dollar houses where being built and skewing the median price upwards, all the foreclosures, short sales, bank owned properties, etc., are now skewing the prices downwards. When 40% – 60% of the properties being sold in an area are “distressed sales”, the true average value of the typical home is not being properly accounted for in the monthly sales numbers and therefore I believe is overstating the severity of the price collapse. The majority of these homes that are currently being sold in the market are at the low end of the price spectrum and are therefore are overweighting the median home price and showing a larger percentage drop than is actually happening.
The only true way to measure a price change is compare a similar house year over year. Obviously this is sometimes difficult to do being that there are so many variables that go into pricing a property. Such things as square footage, lot size, upgrades, certain streets or neighborhoods, etc. can all affect the value of a property and can make price comparison very difficult.
As the Orange County real estate market stabilizes to a more market in the future, we will see a more accurate number that is stated in the monthly sales report. But for now, be cautious as what we see may not be totally accurate representation of the market. It’s not as bad as reported…..unless your in the bottom half of the pricing spectrum!
