Friday, January 18, 2008

A Paradoxical Median

Speaking of the SacBee, the same article mentioned in the earlier post had the DataQuick December stats by county.

For El Dorado, the median resale was down -7.3%, the median new home was down 17.3%, but the total was only down -2.8% (147, 18, and 165 sales repsectively). A weighted average of the two drops would be -8.4%.

I know medians can be a bit wacky to work with, but it still seems odd that both the components show stronger drops than the whole. I'm sure its possible, but if anyone has access to some real data, I would love to see how this happened. I never work with medians in my line of I am not as familiar with their quirks and perterbations.


Buying Time said...

Same issue with Sacramento County....all the components showed bigger drops than the whole. Really suspect numbers if you ask me.

Buying Time said...

I e-mailed the author, and he said they double checked with DQ previously and they say the number is legit.

Not sure I am convinced (but am impressed the Bee had already followed up)....the PhDs at my work get things wrong on occasion. When you have lots of numbers and forumlas in Excel, its easy for a mistake to go undetected.

Paul said...

Is it possible that DataQuick is including the "sale" when the bank buys the property at its own auction? I know the SacBee data includes the auction as a "sale."

Gwynster said...

It's very possible Paul since they track the TDs.

Sippn said...

Averages - Mean, median, mode - does that make you want to remember what they were teaching in? (my kids say pre-algebra) but stats also.

Weighted averages would work with the mean.

Median is 1/2 the sales were above, 1/2 below. . . a silly measure that everybody uses. What happens with the median, is when loans suddenly get hard to acquire above $417K, sales slow on the top end, dropping the median quickly, without necessarily dropping an individual home price. (and vice versa)

MOde is really strange, but use $100,000 price ranges and you might say that $300,000-400,000 is the mode (largest number of homes in this price range)

If you download the local Realtor Association monthly report, they often report all three (as if a Realtor could understand it!)

Doubt the guys at DQ know the difference either.

But of course, economists have enough problems understanding this stuff too. OFHEO now has an index that compares the prices on sales of the same home over time. Like that one but it really lags.

Case-Shiller index is interesting, but you could argue about how their base year really creates their signiture issue and is their inflation adjustments legit?

(G - I've lost a lot of respect for Ivy League PHD's recently watching the PHeD let Wall Street run them over - of course they can spell bettrn' me.)

Oh and I can't read the Economist without the English accent playing in my head - so I don't.

Gwynster said...

LOL Sippin,

I thought I was the only person who read the Economist with an accent >; )

JOATMON said...

I surprisingly agree w/ Sippin. The sudden change in availability and interest rate for financing above $417K that started in August could have a huge effect on sales.

The large drop in median sale price supports that. We know that Home Price/Borrower Income has gotten way out of whack - what % of family incomes could support financing > 417K once sane regulating standards were restored? Think about what would happen to the flow of auto traffic if ALL of the traffic lights in Sacramento would suddenly stop functioning at the same time. That's what happened to the housing market in August for properties > 450K.

Jacob said...

Well all the traffic lights still work, they are just staying red.

sacramentia said...

Did anyone else take a look at the 2400sq ft reo in folsom for 259k? unfinished pool, some flood damage inside. There were so many people looking that it showed at the right price there is significant demand.

Sippn said...

you'll get what you pay for.

Bank owned = no disclosure

Unfinished pool = was it done with licensed contractors? Leak?

Flood damage noted in description, no mold cert offered.

I didn't see it. What did the flood damage look like and how was the pool and yard?

alba said...

not that homes around, or below the median aren't dropping, but also, there are no homes selling with Jumbo loans at all; with the interest rate more than a point higher, and climbing. A few of these homes sold skews the median.

Buying Time said...

"There were so many people looking that it showed at the right price there is significant demand."

Tia - Now its my turn to laugh....isn't that what we are all waiting for....prices in line with local incomes?
I would imagine 259k comes pretty close to 3x Folsom average houshold income (86k or so) one stat I saw it was right on the money!

Sippn said...

its damaged goods, and might not qualify for a mortgage in the condition it is in folks! At least $50K work.