Why median prices are misleading

We've been down this road so many times together, but let's go down again: median prices present a somewhat misleading picture of the market. In the current market, distressed properties
(think Palmdale and Lancaster) are selling, and homes in established neighborhoods (think Santa Monica, as in the photo) are not.  Median sales prices are thus skewed toward the distress. By how much?

Here's an exercise: In Palmdale, population 140,000, MDA DataQuick counted 319 single-family homes sold in September, or one home for every 438 people. In Lancaster, population 143,000, 366 homes sold -- or one home for every 390 people. But in Santa Monica, population 87,000, only 15 homes sold -- one for every 5,800 people.

There are two headlines here: Palmdale and Lancaster have an outsized influence on Los Angeles County median sales prices. They are weighting the overall county numbers toward lower prices and larger price declines (The median price in the county is now 31% below year-ago levels).  The second headline is worth noting: the residential real estate market in Santa Monica, one of the larger collections of high-priced homes in Los Angeles, was essentially frozen in September. Frozen. I can't imagine October will be much different.

--Peter Viles

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Photo Credit: Michael McCreary

Comments

[Crash and Burn]

I think that's kind of like saying that your passenger driver's rear mirror is misleading because "objects may be further than they appear". The median is the best data you have, and of coarse it will be a little skewed in terms of things like foreclosures and such, but there will always be factors skewing it (and many that cancel each other out) and it won't be a huge error. Those values are the only real values you have and come from real data, unlike speculation like lack of foreclosures in Santa Monica skews the median.

And if you are so worried about it, just publish the Case-Schiler index data. There will be no bias there.