Median Price Preview (Q1 2008)

We've said here before that median price is just one of many awful measures of real estate prices and activity. Still, it's a common measure and most people can wrap their minds around it. (It never hurts to remind folks that a median is not an "average" [mean], but the one price at which half of all sales recorded are above that number, and half are below.)

In comments here at MBC, someone posted the following median price stats for Q1 2006-2008, drawn from the MLS:

2006 - $1,625,000
2007 - $1,655,000
2008 - $1,832,000

These statistics were said to reflect all sales in MB in these 3 comparative periods – which means some sales we don't cover here, i.e., THs/condos and sales East of Sepulveda. And, obviously, Q1 2008 hasn't quite finished yet, so there's some chance for that number to change.

We were inspired to check on the number of sales in our subject region, and the median price for those, so we compiled the sales to date in a one-page spreadsheet. (Click to download the PDF.) It will be little work to re-publish that once the quarter's over, so we'll let you know when that's up and ready.

What did we find?

There were 29 sales in our subject region in this period. (We're dealing with closed sales; these were deals made in December 2007-Feb. 2008, mostly.) That's a pretty small sample, so we should be careful what kinds of conclusions we draw.

The sales prices went from a low of $772k to a high of $5.6m – quite a range. The median for this sample is pretty solid at $1.950m – solid, because the next sale below it was also $1.950m and the next above was $1.999m. You wouldn't expect too much movement with 5 more days' worth of sales coming in.

There's more to look at here than just median prices drawn from small samples.

Look at the price ranges of these sales, and they fall this way:

• 8 sales below $1.5m
• 12 sales between $1.5m-$2.5m
• 9 sales above $2.5m

On first impression, seeing that 21 of 29 sales were over $1.5m, we wondered if sales were out of proportion to current inventory. That is, were there more higher-priced sales, for instance, represented in that group than there are higher-priced listings among current inventory?

Alas, no. Take this small sample of 29 sales and compare it to a somewhat larger sample of 91 current active SFR listings in our subject region, and the numbers match up:

• 26% of inventory is priced below $1.5m; 28% of sales were in that range;
• 40% of inventory is priced between $1.5m-$2.5m; 41% of sales were in that range; and
• 34% of inventory is priced above $2.5m; 31% of sales were in that range.

So closed sales are being reported in essentially the same proportions, based on these price ranges, as we see among active listings. To make that simpler: There's no obvious spike in sales in one price range or another.

We have the general sense from tracking market activity over the past year that inventory below $1.5m is starting to bloat for the first time in a while – mostly in the Tree Section. And we, like many, have seen the proliferation of sales at the high end as a sign of a significant bifurcation in the local market – luxury homes just keep selling, while more modest (and marginal) offerings are stalling out.

We think both trends are real, but at the same time we'll concede that this data snapshot doesn't support either claim. We're eager to hear your thoughts on what this quarter's sales (to date) say to you.