There are various methods to manipulate statistics to eventuate a predetermined or predisposed outcome. Or if one is a blogger, one may pick and choose other articles which include those conclusions which one already agrees with. (That is my personal fav.) Unless every last smidgen of data is included and analyzed as regards a particular event or behavior, there is a chance that the resulting statistics will not be all inclusive, or maybe just plain inaccurate. For comparison and as much possible clarity, it is usually best to use the number set that is standard for a particular statistic. An example would be to use sales to calculate monthly inventory instead of some arbitrary and misleading number called ‘deals’.
The comments sections of blogs seem to have a running argument about whether the quoted statistic should be using the average or the median or maybe even the mean. In my observation, all are reasonable and eventually reflect the same outcomes or trends. Median is the number most used for displaying real estate prices trends and IMO, it is probably the best indicator of real estate price trends. But it is just a price trend and in the short term it is a mistake to assume that if the median price of homes in a particular area is rising or falling, that the price of individual homes is concurrently rising or falling. If fifteen homes sold in Coto de Caza last month and the median price rose, it does not particularly follow that the price of all, some, or even any of the homes that sold, sold for more than they sold for last year, or last month, or any other time period.
from Wikipedia”
In probability theory and statistics, a median is described as the numeric value separating the higher half of a sample, a population, or a probability distribution, from the lower half. The median of a finite list of numbers can be found by arranging all the observations from lowest value to highest value and picking the middle one. If there is an even number of observations, then there is no single middle value; the median is then usually defined to be the mean of the two middle values.[1][2]
In a sample of data, or a finite population, there may be no member of the sample whose value is identical to the median (in the case of an even sample size) and, if there is such a member, there may be more than one so that the median may not uniquely identify a sample member. Nonetheless the value of the median is uniquely determined with the usual definition. A related concept, in which the outcome is forced to correspond to a member of the sample is the medoid.
At most half the population have values less than the median and at most half have values greater than the median. If both groups contain less than half the population, then some of the population is exactly equal to the median. For example, if a < b < c, then the median of the list {a, b, c} is b, and if a < b < c < d, then the median of the list {a, b, c, d} is the mean of b and c, i.e. it is (b + c)/2.
When we see a article with a title saying something like “Home Prices are Rising”, or “Home Prices are Falling”, it is our responsibility as readers to understand what we are reading. (Cuz, the author most likely won’t tell us). We have seen articles in the OC Register and other MSM with titles like this, and while I hesitate to point and say they are intentionally misleading, they are misleading. There are some areas in Orange County, (Irvine and maybe Santa Ana), in which some homes have appreciated since 2009, but it is not the majority of areas, and it is a small percentage of the total number of OC homes.
Most of the time, a change in the median home price will indicate a trend in individual home prices, but not always. Median home prices in the OC have risen. Individual home prices have not, or in other words, home values are not appreciating. And the fundamentals affecting home prices have not improved . Is household formation increasing? Are wages and income increasing? Is employment increasing?
Every method for analyzing data only reflects exactly that data which is used and does not always fit our notion of what is important. Personally, I think that over time, the median price is the best number to use to keep track of home prices, but I have to remember what I am looking at. For me, Case-Schiller is the bible of home price statistics and I get a little uppity whenever I read someone questioning Case-Schiller results or methods, but it is dangerous to get complacent and never question that which we take for granted, and even Case-Schiller should be examined.
Jim the Realtor at bubbleinfo.com, takes on Case-Schiller in “August Sales Revisited.”
from Jim Klinge
We’ll take a closer look at the Case-Shiller Index, but if I were you, I wouldn’t be betting in their futures parlour based on what you see on the street.
