MARCH 2008
Community Paper
Lies, "Darned" Lies, and Statistics
by Mike Derenthal, Derenthal Realty Group and College Park resident
Benjamin Disraeli (later attributed to Mark Twain) was quoted as saying there are three kinds of lies: Lies, "darned" lies, and statistics (I'm trying to keep this article PG). There are a lot of statistics floating around in the press these days about our housing market, many of which are misleading, if not altogether irrelevant.
Most of what I read in the press focuses on percentage changes in values from one year to the next, or the percentage change in the number of homes sold from the same month a year pior. This kind of reporting makes for some interesting headlines, but in terms of helping homeowners truly understand the effect on their individual home it doesn't really accomplish much.
Trying to put the value of your home into perspective by comparing to values that may have been over-inflated a couple years ago isn't all that relevant in my opinion. I think it makes more sense to use a baseline from a more typical market situation.
I decided to run some of my own numbers, just for kicks and giggles. Keep in mind I was an engineer in a previous life, and I have been accused of enjoying a good spreadsheet more so than others might find socially prudent, but with that disclaimer on the table, I'll try to keep this interesting. Hopefully this might give you an idea of where your home sits with respect to the rest of our market.
I took a look at all closed sales listed on the MLS for single family homes within the 32804 zip code between 1/1/2000 and 4/20/2008. The following represents over 2400 different closings spanning an eight-plus year time frame.
Some interesting points:
• Values in our eclectically charming neighborhood have ranged from a low of $30,000 back in June of 2000 to a high of $3.2 million in May of 2007.
• The average College Park home that sold in 2000 was 1474 SF, 2.8 bedrooms, and 1.7 baths, and sold for $173,000.
• By 2007, that average College Park home had grown in terms of square footage by about 200 SF, but with the bed and bath count relatively unchanged. This would fit with the observation that more owners craved additional living space and constructed small additions, but were content (or more likely constrained by lot size) to add much more. More significantly, the average selling price in 2007 had jumped to $383,000.
• Average property values (based on a $/SF analysis) peaked in College Park during the 4th quarter of 2006 at about $240 per square foot.
• Average values dropped to $221 per square foot in 2007. In the past 12 months (including the first quarter of 2008) values edged down further to $214 per square foot. Currently in the first quarter of 2008, selling prices are averaging $195 per square foot, approximately where they were in the last quarter of 2004. Keep in mind, this 2008 number is based on a much smaller, albeit statistically relevant sample size of 42 homes.
• Homes sold in 2000 through 2006 typically took between 55 to 65 days to go under contract. In 2007 the duration jumped to almost 100 days, and so far in 2008 it is averaging a lengthy 130 days.
• And here's one that I found particularly interesting: Between the period of 2000 through 2004, the percentage of cash buyers (typically representing seasoned investors) held fairly consistent each year at about 11% to 12%. But this percentage dropped considerably to as low as 8% during the peak in 2006. We all recall the fervor as loose financing standards and a heated market made everyone a real estate investor. This pushed values up, which also had the effect of pushing most serious cash investors to the sidelines. I recall the common complaint among investors during that time was that "the numbers just don't work right now." Well guess what? The investors are back, and so far in 2008, the percentage of cash buyers is up significantly, to well over 14%.
Is there a bright side to any of this? Absolutely. Our market is moving again. The last quarter of 2007 was dismally slow in terms of market activity, but ask just about any professional realtor in town, and they'll tell you that they've found themselves busy again. Sellers are getting realistic on prices, and buyers continue to creep back into the market, many of them "move-up" buyers who had been missing until recently. And believe it or not, the return of investors is arguably one of the best indicators of recovery. There is no substitute for a vote of confidence in a market than good old fashioned, hard earned cash.
And before placing too much credence on the statistics in this article, go back and read the opening sentence. These are all averages, and almost certainly guaranteed to be wrong when applied to individual properties. As always, your questions and feedback are appreciated.
Feel free to drop me an email at mike@derenthalrealty.com.
by: Mike Derenthal, Derenthal Realty, www.DerenthalRealty.com
1520 Edgewater Drive, Suite E, Orlando, FL 32804
407-965-1919
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