Numbers don’t lie. But they can definitely mislead.
In 2003, the median price of a single-family home sold in Massachusetts was $305,000, according to information obtained from The Warren Group, publisher of Banker & Tradesman. Through the first five months of 2012, the median price of a single-family home sold in Massachusetts was $270,000. That’s a price decline of roughly 11.5 percent.
In looking at those numbers, the average Massachusetts homeowner could probably be forgiven for thinking their home today is worth 11.5 percent less than it was roughly a decade ago.
They’d also probably be wrong.
We’ve been hearing from realtors that continued price declines are more a function of the type of properties being sold than of a broad-based, indiscriminate decline in values. In other words, more lower-priced homes are being sold, dragging down the median price across the board.
And the data appears to back them up.
Through the first five months of this year, 56.52 percent of single-family homes sold in Massachusetts were priced at $300,000 or below. Homes priced $500,000 and above represented 16.69 percent of the market.
During the same period in 2003, homes priced under $300,000 made up only 51.8 percent of the market. Homes priced at $500,000 and above, meanwhile, represented 14.41 percent of the single-family market.
So while the proportion of homes sold priced well above the median and those priced roughly at or below the median both rose between 2003 and 2012, the ratio of lower-priced homes rose faster – up 4.72 percentage points compared with 2.28 percentage points for more expensive properties.
But an even closer look muddies the water considerably. In 2008, for instance, the median price of single-family homes in Massachusetts stood at $305,000 – identical to 2003.
But the number of homes sold for less than $300,000 in the first five months of 2008 represented only 46.15 percent of the market. Homes sold for $500,000 or more accounted for 20.47 percent of the market during the same time. How, then, to explain the same median price, if a far greater percentage of the market in 2008 was comprised of far more expensive homes than in 2003?
By this point, perhaps you’ve caught on to the game we’re playing. We’re comparing full-year median price figures to ratio calculations that only include January through May data. We’ve offered no context to help our readers rationalize the figures we’ve presented thus far. We haven’t told you, for example, that the total number of single-family sales in 2003 was almost 25 percent higher than in 2008. And we haven’t told you that the median price for single-family homes sold in the January through May period in 2008 was actually $312,500, up considerably from $295,000 for the first five months of 2003. So while each year ended with the same median price, a second-half surge in 2003 brought full-year prices up, while an historic slump at the end of 2008 brought prices down.
Our point in this exercise is this: People can create any kind of picture that’s equally confusing as the one we’ve painted, based on the vast amount of publicly available real estate data.
It’s whether or not we choose to accept these conclusions that matters. Has every home in the Bay State really lost 11.5 percent of its value over the past decade? Of course not.
But if homeowners, buyers and sellers are going to believe they have, it’s critical that their realtors give them that context, illustrate local nuances, judge which data matters and which can be ignored and help fill in that bigger picture by any means necessary.
In this sense, the most important role of the realtor is not necessarily to help us price and market our properties, but to serve as our own personal real estate information editors – before we make critical, life-altering decisions based on little more than misleading math.
