Explanation of real estate statistics

Basic real estate statistics explained

We are going to define some of the basic real estate statistics that are published on a regular basis. To do that, we will use a real estate market, located in Hood County, Texas. Even more granular, we’ll use the single-family home numbers for homes in Granbury Tx, a small city of approximately 8,000 residents that has seen substantial real estate growth in the last 12 months. When reviewing real estate statistics, it is important to use a set of numbers large enough for consistency, but granular enough to tell your story.

The statistics to which we will refer are true and accurate for the year analyzed, but are being used to define the real estate statistics itself.

We have chosen Granbury Tx as our example because the growth of the local real estate market makes the static stand out.

Whenever you are evaluating statistics, especially in real estate, the source of the numbers is extremely important. In most cases, MLS (Multiple Listing Service) provides the most accurate numbers when it comes to real estate. This is because they have all the listings of all the local real estate brokers in their database. For the sake of data explanation, we will look at Granbury Tx home sales figures, directly from the MLS. These numbers are intended to give an example of how to read your own statistics. Whenever you are evaluating real estate numbers, it is important to pay close attention to how the numbers are collected. In this case, we will ONLY use single family properties in the City of Granbury.

Basic real estate statistics

  • Number of sales – This one is self explanatory. It is simply the number of single-family homes sold in a particular month. In January 2015, 51 single-family homes were sold. One thing to pay attention to when looking at this statistic is whether they are using the date under contract or the day the property actually closed. These two dates are usually between 30 and 60 days apart, so it is essential that you know which one is being referred to. Also, many of the houses that are calculated, if you are using the “under contract” number, may not actually close! In our example, we are using the number of houses that actually closed. In January 2016 they had an increase of more than 49%, bringing the total to 77 from 51. Rarely has growth of that level been seen.
  • Sales volume – Sales volume is simply the total amount of dollars spent on single-family homes during that month. Again, when reviewing this statistic, it is important to keep property types consistent. If you are comparing two areas to see which has grown the most, and you include vacant land in the number for one area, you should also include it in the other. As mentioned above, our examples only include single-family properties. With Number of Sales looking at the units, you would expect the Sales Volume to increase appropriately, but in this case, it increased even more than the units (by percentage). Total single-family home sales volume in Granbury in January 2016 was $ 15,191,500 compared to the January 2015 number of $ 9,281,915. That is an increase of more than 63%. Because sales volume increased at a higher rate than the number of units, this reflects that average home sales were much higher in 2016 than in 2015.
  • Inventory months – This is a statistic commonly referred to when examining a real estate market. This statistic refers to the current rate of sales, how long it will take to sell through the existing level of inventory. This reflects the supply and demand of the market. In our example, in January 2015 the inventory level was 9 months and in January 2016 it had dropped to 6 months. That’s a 33% drop in on-hand inventory! This means that if you are looking to buy a home in Granbury Tx, it will be a bit more difficult in 2016 as there is less inventory available to buy.
  • Average days to sell – This statistic simply refers to the time it takes to hire single-family properties. Don’t let “sell” confuse you. To accurately show the demand for active homes, you really want to keep track of how long it takes to be “under contract.” The process of obtaining final approval from the lender, insurance, and closing can vary based on a variety of factors. In January 2015, the median days to sell was 88. That number dropped by more than 30% to 61. Again, this tells you that if you are looking for homes in Granbury TX, you better get your offers quickly, as it is the most desirable. Houses go fast!
  • Average price – This statistic can be derived in several ways. We will use it in its rawest form and we will simply be the median house price. Sold within that month. Be careful looking at this statistic printed anywhere, as the way the user defines the sale date can vary. It goes without saying that the median price can be used for active homes for sale or for homes that were sold. The median price of ACTIVE homes for sale is generally a pretty useless number, as you can list a home at any price, with no chance of it being sold. Many homes for sale are priced unrealistically, so the average price of active homes for sale can fluctuate dramatically and give little information about the market. You will want to see the average price of houses SOLD. In January 2015, the median home sale was $ 181,998 and jumped to $ 199,888 in the same month in 2016. This is an increase of almost 10%. This is not a number that really tells the increase in the value of homes in general, but simply of the houses sold in that month, what was the average.
  • Half price – Average home sales price can be skewed by a variety of factors. All it takes is a $ 5 million home sale to get rid of those numbers. To get a better view of the overall increase in value, it may be best to look at the median sales price. The median sale price takes the number that is perfectly in the middle. For example, if you have 11 houses that you are using in your statistic, you would take the sale price of the sixth. This leaves 5 houses sold highest and 5 houses sold lowest. In this case, they are quite close, since the increase in the average sale price from January 2015 to 2016 was 9.69%. This shows that we did not have the average price too skewed due to an extremely large or extremely small sale.

There are hundreds of ways to see the same numbers, when referring to real estate, so be very careful to read the fine print of exactly what numbers they are using. When making comparisons, you want to absolutely make sure that they both refer to the same property types, dates, and so on. It’s like the old saying goes … there are lies, damn lies, and statistics.

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