Thursday, February 11, 2016

"Lies, damned lies, and statistics"

That line often used by Mark Twain came to mind as I was looking at the web site of one of the more prominent brokers in town today.  In it they have a section called Market Conditions where they break down certain residential real estate statistics by MLS district and subdistrict.

Just like almost everyone I know, I always look at my neighborhood.

It shows 30 properties "for sale right now" and an average days on market of 96.

Here's what our MLS says:

It's a little hard to read -- you can click on it to enlarge.  It says there are a total of 12 properties for sale (1 single family home and 11 condos/TICs).  Average days on market is 30 for the condos and 3 for the single family home.

Their "average days on market", or DOM, is way off the mark at 96.  If that number refers to the currently active listings, the MLS says the average days on market is 30.  If it refers to previous sales, the average DOM for sales during the two month period 11/15/15 through 1/15/16 is 44.

Sometimes "active" listings are calculated to include those already in contract but with contingencies.  Even if you include those properties, the number of active listings on Potrero Hill is only 21.  But, for all practical purposes those additional 9 properties are not available for purchase.

We spend a lot of time surveying and reporting sales numbers for the San Francisco residential real estate market and there are a lot of other sources that report mostly sales data.  As this example shows, it's easy to get confused over apparently conflicting reports.  What's often missing is context.

Reports should always explain exactly where (and when) the data comes from and what it includes. In the case of this broker, their "active" data is four or five days old.  Our reports also try to compare apples to apples.  Reporting a general "average" sales price by lumping together condos and single family homes, studios and mansions, doesn't serve any real purpose since no buyer is looking for an average house.  Buyers are looking for specific configurations so knowing the average sales price that includes everything isn't terribly useful.  Similarly for the seller of, for example, a three bedroom single family home, a general average doesn't provide much guidance in setting their asking price.

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