The news reports and the studies about the real estate market can be very skewed and must be considered before making a true prognostication. As we learned in statistics class, it is very important which numbers you are comparing, or which home sales you are using.

 

I read California Association of Realtors Homedex® Report which is put together by Robert Brown, Ph.D., California State University, and San Marcos each month. This report is very thorough and has a breakdown of each city in San Diego County. It is important that the entire report be studied and month after month be considered before any predictions can be made. The media never does that.

 

The media usually spends a few seconds broadcasting facts and figures from reports such as Homedex. There are many useful such reports that media take their numbers from, but breaking down the market to one category, and not pointing that out, can be very misleading.

 

One media report yesterday claimed that the housing market average home price dropped 30% during the past month. What they didn’t report was which geographical area they were measuring. Another major news report was that the medium priced home in America dropped 35% in the past year. This is only measuring the sold prices and not all houses on the market. If one sector of the market sells faster than other sectors, statistically, you can not make an honest claim about the full market.

 

During 2006 the market in San Diego began to change. Buyers at the low end of the market (below 500K) slowed down purchases. The market began to drop. The high end of the market didn’t have the same effects against it. When reports were published about San Diego’s market, they claimed insignificant drops in prices. This was due to an average or medium measure of sold properties. When Del Mar continued increasing in value While Vista didn’t, it threw off the medium price for the county. Additionally, there was no measurement of the properties that placed 2005’s appraised value on their home which never sold.

 

The figures can be further skewed from month to month when breaking down the area to a single city. If one city has six units sold one month then nine units sold the next month that would be an increase of fifty percent. If those units are on the lower end one month then the following months a few higher end units were sold, the reports could claim vastly different sold reports. This happens most frequently when numbers from the same month last year are compared. If Del Mar had a large number of sales in 2007, yet Oceanside had greater sales in 2008, the medium price for San Diego would be greatly reduced.

 

I believe that North San Diego’s market has recently been driven by investor’s. They watched the prices, knowing when their investment would get a positive return as a rental. They started buying. For six months sales have been double that of sales in 2007. That is number of units sold, not total sales dollars. I believe that is a very important measurement.

 

Now, if the total number of foreclosures decreases; the number of properties will become less than the number of buyers. Because of supply and demand prices will rise. If first time home buyers see this time as their opportunity to purchase then they will begin to drive up prices. As banks renegotiate more ARM’s and less short sales and foreclosures are found, we will see the market turn up. The reports will show it but not for months after it has happened. Even then, studying the numbers can give misleading information.