YOU ARE HERE: LAT HomeCollections

Home Price Numbers

May 07, 1989

Commendations are in order for the interesting and informative article by David Myers ("Why Home Price Numbers Don't Add Up" April 23).

Regardless of whose figures are the most accurate, Appleton-Young's point is well taken: namely, that the housing price figures are really only useful as indicators of long-term trends, and that it is foolish to think that they can be applied to individual cases over a short period (as in: "My house went up $3,500 in the last two months").

Housing price statistics may often mislead in another way that was not mentioned in the article. That is, when people see that the median (or average) price has risen by, say, 18%, then they tend to think that properties across the price-range spectrum have all been appreciating.

However, the fact that the median (or average) has gone up may only indicate that the higher end of the market is selling, whereas activity at the low end may be flat. It is possible to have depreciation at every segment of the market, yet get statistics suggesting a price increase, because the majority of sales are at the higher end.

Nor are such scenarios wholly unlikely. Our experience suggests that interest rate hikes have a greater dampening effect on sales in the lower ranges than the upper. Thus, in the current environment, with interest rates going up, we are seeing a slowdown in sales at the lower price ranges, yet the median (or average) is rising because there are still sales at the high end.

If only so-to-speak "academic" mistakes were caused by misinterpretations of the statistics, that would probably be of little concern. What is most regrettable, however, is that would-be home sellers, and sometimes their agents, wind up pricing themselves out of the market because they have misunderstood the import of the published figures.


San Clemente

Hunt is a member of the board of directors for the South Orange County Board of Realtors.

Los Angeles Times Articles