September 24, 2008

Median Price Methodology--What's Your Home Really Worth? As a frequently unasked question and part of our real estate REVEALED series, we delve into how the median price is determined and reported for your city. Listen right here or subscribe to our Podcast by clicking on the upper left RSS icon. This graph illustrates the appreciation for homes which sold in the second quarter of 2008 and had previously sold within the last ten years. Clearly the best way of determining what appreciation is for a particular home is to watch the home trade hands in an arm’s length transaction several times over many years without any major improvements (other than maintenance). The Case-Shiller Home Price Indices Methodology comes closest to achieving this on a macro level. However there are inherent limitations in the methodology they employ. We’re not here to find fault with their method of data collection and interpretation—clearly it is as good as it gets on a macro-level—but for interpreting micro or niche markets it uses too broad a brush to paint an accurate picture of a particular area's housing landscape. Here’s why: · It lumps many micro and niche markets into one large metropolitan area and cannot effectively differentiate smaller market areas since it relies on huge volumes of data in order to arrive at meaningful results. · It uses an algorithm to exclude all old sale pairs to support their assumption that older home sale pairs must have been remodeled. This has the unwanted effect of throwing the baby out with the bathwater,...

Drew Morgan

Sponsored by Drew & Christine Morgan"Helping People Make Good Decisions"smReal Estate Sales and ConsultingCarlmont Associates

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