You can likely guess the question that I get asked most often is, “How is the market?”. I assume the underlying question really is, “What’s happening with prices?”. This is where statistics come into play and can be manipulated to tell the story you want to tell.
For whatever reason home prices are presented as the median home price. If you’re not a statistics geek like me, that may need further explanation. There are three statistical averages, and each produces a different result. The 3 are the mean, median, and mode.
Real estate prices get reported as the median home price. Mean is the average we all think of. Add all the numbers and divide that total by the number of records. Median is the number that is exactly in the middle of a string of numbers ranked in order. When you take the median home price for March, you take every single home that sold in March, rank them in increasing or decreasing order, and you go right to the middle and that is the median home price. This is where the “mix of sales” comes into play.
In a high-price state like California, and also smaller cities like Oak Park or Westlake Village, if you happen to have more expensive homes sell that month, that increases the median price, even while the average price (median) could either not be going up as quickly or could even have gone down a little bit.
How does this relate to today’s market?
The expectation is that we are going to start seeing the year-over-year (April 2023 compared to April 2022) median home price go down dramatically. Prices dropped 12.9% from April 2022 to April 2023. From the peak in April 2022 to January 2023, prices went down 23.2%! Though, for some reason, the January 2023 median home price in the area was unusually low. This is an example of how someone can choose whatever numbers they want to tell whatever story they want. Reported averages could overexaggerate what is actually happening, as it does in this case. With this low average in January, through April the median home price has increased 13.4%.
Making your head hurt? Bottom line is that we are back in a market heavily influenced by low inventory.