Spinning the Averages
It’s time for all the year end statistics and market reports to be calculated and published. While some will offer doom and gloom, others will paint a rosy picture. Somewhere in between the two is the truth. Everyone has their own spin! You’ve heard me say it before; averages are just that and do not apply to a specific neighborhood.
When the media says the average home prices have decreased by xx% – it is an overall average. Does this mean averages don’t matter? Not at all! If you are going to use averages, though, they must paint a true picture on a local level to offer significant value. Even on a local level, the numbers must be evaluated for accuracy.
Now, a bit about how our local board reports averages. When a home is listed and doesn’t sell, it is what we call an expired listing. At that point the previous days on market are gone and are not calculated. Same thing happens when we have a price change. When the home does sell, the numbers (averages) are posted based on the current list price and days on market. It’s just the way our system calculates.
How does that affect the Days on Market and List/Sale Ratios? Let’s take a look: Of the 16 homes sold in an Indianapolis suburb last month, here’s a few examples of how the true numbers create a different outcome to the averages. For the record; SP/LP = Sales Price vs. List Price.
One home shows it sold in 127 days on the market. The final list price at the time of sale was $499,900 and the home sold for $465,000, which is 93% of list price. A little lower than the average or median SP/LP shown.
The real numbers – The home was actually listed for three months, then off the market for three weeks, then back on the market. The original list price was $549,000, then went down to $529,000 and was re-listed at $529,900. The actual days on market for this home was 217 and the SP/LP was 84% of the original list price.
Another one – Home shows it sold in 29 days at 91% of List Price. It was actually on the market for 6 months, expired, then was listed again. The real numbers – 209 days on market at 83.9% of the original list price.
One more – Although the days on market are correct on this one – the actual SP/LP ratio will affect the averages reported.The home was listed at $129,900, when it it sold, and it sold for $125,900, which is 96.9% of list price. The original list price was $169,900, which makes the SP/LP ratio 74%.
Why look at these numbers? For me, it’s a matter of local knowledge and I guess the same answer could hold true for you, because if you are thinking about selling your Indianapolis home, these are the numbers you want to know for your neighborhood.
Thanks for reading!