Friday, November 30, 2007

The smoke screen of the "Median Price"

In the last post the CAR say's the median in Riverside/San Berdu is down 15.6%. I noted at the end of the post that the Median does not accurately reflect the drop in price. The reason the Median does not accurately reflect the true drop is that the "mix" of homes selling has changed. These days there are more higher end homes selling than low end homes. This artificially keeps the median higher. I found a perfect graph over on Piggington's that illustrates this. In the graph you can see the mix of homes is split into High Priced, Medium priced, and Low Priced. You can see the sales numbers of each type stayed close together until early this year. That means the median was probably fairly accurate until sometime around Spring 2007. Then the Low and Medium priced homes started to diverge from the high end homes. High end homes continue to sell better while the lower and medium priced homes were not selling. The higher number of high priced homes in the data sets is keeping the median price high. But this does not accurately reflect the true drop in prices that homes are selling for. I think it should be obvious by now, after the hundreds of homes I have shown on this blog that the prices are off 30% to 40% at a minimum in the IE.

Note, this chart is for San Diego. I would expect the IE is not too different, if anything our low and medium ends are probably worse.

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