Three Popular Real Estate Statistics Offer Little Help

Reprinted from Mike Cotter's San Clemente Real Estate Blog 07/06/12

Mark Twain popularized the phrase, “There are three kinds of lies: lies, damned lies, and statistics.”

What I find fascinating, however, is the fact that people will rely on popular real estate market statistics to help guide their decisions, even though such numbers don’t help much.

For example, homeowners often look up national, state or county market statistics to tell them how their real estate is doing.

But all real estate is local.  There is really no such thing as a national real estate market. Only an analysis of your home and immediate neighborhood can tell you whether your equity is going up or down.

Then there’s the famous “supply and demand” maxim.  This universally believed adage, dubbed “Economics 101″ for being so obvious, holds that the greater the supply of homes for sale, the lower the average selling price.  Conversely, the lesser the supply, the higher the average selling price, all other things being equal.

While this must be true, the problem with the sacred formula is that it is difficult to prove with statistics at the local level, where the decision to buy or sell takes place.

Looking at a six-year chart of the San Clemente market, for instance, one will notice that a steadily shrinking supply of homes for sale has had virtually no positive effect on home prices.  As a matter of fact, the last four to five years have seen falling inventory and falling prices at the same time.  This chart practically disproves the sacred maxim.  My own experience tells me that this is counter to the reality on the street, but “figures don’t lie,” right?

Another predictor or leading indicator of home prices is supposedly the volume of sales.  In early 2008, when local real estate prices and sales volume were falling like an anvil through water, many pundits said to watch for a turnaround in volume.  Such an event would surely foresee a rally in market prices.

The turnaround in sales volume came shortly thereafter in the fall of 2008. But the rally in home prices is apparently just beginning to show up in the last six months, four years late.

At this point, I would normally remind you that “figures don’t lie, but liars figure.”

But I don’t have a chart for that.

For more on the San Clemente housing market, check out MCotter.com, especially latest market statistics and neighborhood stats.