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Why Home Price Numbers Don't Add Up

April 23, 1989|DAVID W. MYERS | Times Staff Writer and

The price of a typical home in Los Angeles is $201,578. Or $198,655. Or, depending on who's doing the figuring, anywhere from $189,545 to $514,460.

A typical Orange County home sells for $237,409. Or $225,335. Or is it $220,000?

The disparity stems, in large part, from the fact that more than a dozen different trade groups and private companies publish home price figures on a regular basis.

Each tracks prices differently, and each of the economists and researchers who calculate the numbers is eager to explain why his or her estimate is the most reliable--and those of other statisticians are not.

The disparities cast doubt on much of the talk about how "my home has gone up $100,000 since I bought it three years ago" that is so prevalent in the Southland.

And price differences may also have a subtle but widespread impact on California residents and the economy:

Some experts say the uncertainty of what a typical home really costs may be keeping companies from expanding their operations in the state while, at the same time, making the national economic picture look better than it really is.

"Home price figures are like noses: Everybody has one. And like noses, everybody's figures are different than everybody else's," said Stan Ross, a co-managing partner of national real estate consultants Kenneth Leventhal & Co.

In California, the most widely reported numbers are tabulated by the California Assn. of Realtors.

Although the trade group collects sales data from only 74 of its 181 boards of realtors in the state, those boards represent areas that account for more than half the state's home resales, said Leslie Appleton-Young, CAR's director of research and economics.

Each of those 74 boards records every transaction that closed escrow in its area on a monthly basis and then submits that data to CAR. The state association combines the boards' data to derive a median price for each of 15 regions in California--a figure that is supposed to reflect a midpoint in home prices for each given area.

For example, the trade group says the median price of a home in Los Angeles is $198,655, meaning that half of all homes sold in February (the most recent reporting month) sold for less than that amount and half sold for more.

"It's a good way to measure price trends," Appleton-Young said. "We're confident our numbers are accurate."

But the realtors' system isn't perfect. Since 60% of the boards don't report their information to CAR, the monthly figures that the trade group publishes reflect only the information gathered from the 40% that do.

In Orange County, for example, which CAR says is one of the most expensive housing areas in the state (median price: $237,409), six of the county's 11 boards share their information with the trade group.

But the large Anaheim and Buena Park/Cypress/La Palma boards are among those that don't submit data, and they represent some of the county's lowest-priced areas, with homes that can be purchased for well under $200,000.

Excluding those boards from CAR's monthly survey tends to inflate median home prices for Orange County--and some realtors in the area are upset about it.

"CAR says the median in the county is more than $236,000, but I can show you places where you can get a nice single-family home for $180,000 and condos for even less," said Kirk Kirkland, a realtor and president of a group representing the 11 Orange County boards.

"The (CAR) numbers create an impression that nothing here is affordable, so some people don't even bother looking here when they decide to go shopping for a home. They're scaring some people away from our area. . . ."

'What's Really Going On'

It's not all CAR's fault, said Kirkland; some of the Orange County boards don't report their statistics to the state association because of staffing shortages or other problems.

But Kirkland said his group is working with veteran Orange County realtor and statistician Richard Poucher to devise a report "that will give a more accurate picture of what's really going on down here."

CAR's numbers have other weaknesses, experts say.

The trade group's monthly reports do not include new-home sales, which account for about 25% of statewide home sales and often cost less than houses in established areas. Nor do they track homes that were sold without the help of a realtor, which are estimated to account for between 5% and 10% of all real estate transactions.

Then there's the question of whether a median figure or an average best reflects the cost of a typical home.

Less Fluctuation

The CAR publishes a median figure, Appleton-Young said, because medians don't fluctuate as widely as averages. An average, she said, could be easily distorted by the sale of a small number of multimillion-dollar homes, driving the average much higher.

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