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Making Sense of Home-Value Numbers

Making Sense of Home-Value Numbers

From reading this blog and other media reports, you may be confused by stories that say home prices are up, home prices are down and home prices are stable.  All of those things may be true, depending on which data you’re citing. Different groups collect different statistics, one reason why they get different results.

If median sale price is measured, for example, it could rise in a month when a lot of expensive homes were sold and fall in a month where there were mostly sales of lower-priced homes, yet still not mean home prices in general are falling.

Plus, home prices vary widely from neighborhood to neighborhood, and statistics may look at entire cities or metropolitan areas. One great example is South Florida, where homes on average have fallen in value 50% since the market peak in 2006.

Yet the Miami-Fort Lauderdale area is home to the city where homes have risen in value the most since President Barack Obama took office in 2009 and the city where homes have fallen the most in value.

In Weston, a high-end suburb of 65,000 people west of Fort Lauderdale, home values increased 15.1% from February 2009 to August 2011, the best appreciation in the nation, according to data gathered by Zillow for Bloomberg/Businessweek. That same data show that in Homestead, a working-class city 50 miles away, home values have dropped 48.8%, the biggest drop nationwide.

Of course, statistics are most meaningful when looked at over time. A month-to-month price change is less significant than a year-to-year price change. The statistics also are more useful for measuring trends than for determining the value of a particular house.

SmartMoney recently took a look at the three major home-price indexes and pointed out how you can use them. The San Diego Union-Tribune did the same last year, looking at four indexes.

In brief, here are their conclusions:

  • The Federal Housing Finance Agency statistics are more meaningful if you are in a lower-priced area without too many distress sales to cash buyers. The FHFA measures sales to buyers who got mortgages backed by Fannie Mae and Freddie Mac, now about two-thirds of people who get mortgages. But those data don’t include cash sales or jumbo mortgages.
  • The National Association of Realtors statisticsmay be most helpful in drilling down into your local market, especially if your local organization makes data available for smaller geographic areas. The NAR numbers includes sales through the multiple listing service but don’t include sales that didn’t involve real-estate agents. The NAR also provides data on more cities.
  • The Standard & Poor/Case-Shiller statistics are useful when measuring the value of higher-priced houses in larger cities. The data include only 20 cities, but they look at different price points.

The Union-Tribune also mentions MDA DataQuick, which pulls data from a variety of public records and offers prices per square foot, and Zillow, which uses a computer model to estimate the value of all homes, not just those that have sold. The Zestimates provided by Zillow have gotten more accurate over the years. They are most on target in areas with lots of data to draw from.

For the most local detail: If the objective is to price a home in a very specific location, Gabriel recommends the National Association of Realtors, which breaks data down by locality. While the S&P-Case Shiller tracks 20 cities, the NAR tracks up to 156. Beyond that, its associations in larger states, including California, New York and Illinois, dig even deeper, providing data (on their web site) on even more cities and towns. According to critics, however, the NAR’s data may be skewed since it represents an industry that promotes higher prices. NAR says that’s not the case. “It doesn’t matter what the particular biases of people who are buying and selling homes might [be],” says an NAR spokesman. The data, he adds, is objective.

-Information taken from MSN blog “Listed” and smartmoney.com


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