UP 14%!? No, Down 26.2%!? DATA. What Is It Good For?

I was reading The Washington Post on Sat November 24 and I came across their “Real Estate Trends” report for Fairfax County. They compared the first 6 months of 2006 to the first 6 months of 2007, excluded condos, and they used data gathered through the courthouse (ie. not the MLS).

Out of the 47 zip codes, they said the #1 fastest growing zip code was 20170, Herndon at +14.4%.

How can this be? I recently wrote about Herndon and the Foreclosure mess going on over there with as many as 48% of homes on the MLS from $300k to $400k being in some stage of foreclosure (See my SOL foreclosure post).

So I set out to prove the data wrong (I’ll admit to my bias). I suspicious of the Post disclaimer saying “It excludes some types of marketplace transactions, particularly those that are not at market price.”

Aha! Gotcha! My translation: Take out the foreclosure and short sale problem in Herndon and home prices went up!

Oh this is gonna be good!

Washington Post’s Herndon data:
Jan-June 2006
356 Homes $411,000
Jan-June 2007
123 Homes $470,000
$59,000 increase or +14.4%

 

Frankly Herndon Data (from MRIS)
Jan-June 2006 291 Homes $475,000 Jan-June 2007 199 Homes $485,000
$10,000 increase or +2.1%

I didn’t see 14.4%, but it still went up!?

So then I ran the numbers from July 1 2007 to present.

Frankly Herndon Current Data (from MRIS)
July-Nov 25 2007
134 Homes $421,000
(vs $485k in 1st part of year)
$66,000 DECREASE or 13.1%
(this was based on 6 months later, so one could argue that annualized that is 26.2%)

Up 14%? Down 13%? Down 26.2%? Flip Flop!

 

How can you compare 300 homes in a zip code to a completely different 150 homes a year later? These are NOT the same homes. Add in a new community of 30 homes (which are always much higher than resale homes) and it can make a zipcode look like it was skyrocketing. I even think new homes actually might be the reason why NAR has never shown a decrease in home sale prices (with the exception of this past year).

And even if you DID believe the data, what then? It is still useless! So, if Herndon is one of the few zip codes that are UP (as well as 22046, 22041,22309), what?, you should buy there? Or are they implying that you should buy in the zip code that they say is down 10-19% (22102, 22124, 22031, 22030, 20124)? Since they are a better “deal?”

You also have data extremists, such as bubble prognosticators. To the right is a famous chart from the S&P Case-Shiller index. They are claiming that prices will drop 50%. Is your $500,000 condo going to be worth $250,000 in a couple of years?

Oh, by the way, Robert Shiller is getting rich on this doomsday prognosis.

And the Realtor Assoc comeback to this is weak:

Lawrence Yun, NAR’s chief economist says, “In some ways we’re tracking different things. We use MLS data, so our figures are as timely as possible and are more representative of markets. Shiller uses county records and mortgage data from the secondary market. These sources lag further than ours and they capture a disproportionate percentage of higher-priced homes.”

Let me break that down really quick. NAR’s main excuse is that the data is delayed and is more weighted toward higher priced homes? Um, that was a horrible comeback.

1. Ok, it is 3,6, 9 months behind, so just wait, or move the data over.
2. Are you saying you agree with them in regards to higher priced home? So with the average home in the US being somewhere around $250,000, anything “high priced” like $400k will drop like they say?

NAR better come up with a better comeback to that, no wonder people believe it.

Bottom line is, data is too easy to manipulate.

Ok, so what should buyers do (if they, not their Realtor, decide to buy)?

1) Don’t try to time the market Attn. Market Timers! The EXACT Best Day to Buy!

2) If you are ready to buy, use the Round Robin Method “Round Robin” Buying System. Unearthing The Desperate Seller.

And the only data to look at is data pulled by your agent showing you extremely local data (as in down to the neighborhood) while making adjustme
nts PER house. Does it have a garage? Compensate for that. Larger Sq Footage? Etc. Then and only then can you see any real trends.

– Written by Frank Borges LL0SA- Broker FranklyRealty.com (please report typos!)

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Update: Look at the Nova Housing Bubble and their example of Herndon homes selling for 41% off their previous purchase price.

• 26
• November
• 2007

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