08-27-2013, 10:40 AM
Three friends are meeting in a bar to watch a hockey game. These guys have known each other all their lives and grew up only a few doors apart on Great Expectations Ave a block over from the intersection of Bleak House and Hard Times (the city planner was an old geezer with a passion for Dickens and a wry sense of humour). Professionally, they’ve headed in separate directions; however, they’re determined to maintain their friendships and meet once a month despite life’s ups and downs. Let’s meet them.
ASP is a true extrovert. He’s the life of the party. He’s loud, he’s funny and because he accepts no boundaries the other two expect to carry him out of the bar as they usually do every month. He works in the marketing department of a local professional sports team. He sets new records every year in corporate ticket sales because no one else can match his ability to make a losing season sound like a winner. Everyone loves to be around ASP.
MSP is also an extrovert and appreciates a good time, too. However, being slightly more pragmatic than ASP, he has learned that life tends to run more smoothly if you set personal lines in the sand that you won’t cross. For example, because he hates puking and wants to walk out of the bar on his own two legs, he knows when to cut off the alcohol and start chewing ice cubes. People tend to respect MSP even when they don’t know his profession. He is cop.
BMP is the night to the other two’s day. He is an introvert. Whereas the other two appreciate the physical aspects of the game, he loves its history; but, above all, the math. He needs to keep is head clear. He is the designated driver. He leads the statistics department of a large auto insurance company. He learned early on to slightly fudge his profession when asked what he does - most people will walk away in disgust if they hear the truth. People believe the stats are not to be trusted; they believe the stats favour the industry. He believes that is purely an emotional response which is why he places his faith in numbers. His nickname is Spock.
I was going through the REBGV July Stats Package a few weeks back and I stopped at a page that is included in every monthly report. It is a page that I have tended to ignore because I’ve only heard negative comments about its data - it is the MLS Home Price Index page. It gives the monthly HPI figure for 22 designated areas under four different Property Type categories Residential/Composite, Single Family Detached, Townhouse, and Apartment) and shows how the HPI changed over 6 different time spans relative to the reporting month (1 month, 3 month, 6 month, 1 year, 3 year and 5 year).
Results for Sunshine Coast sales appear in only two property type categories (Residential/Composite and Single Family Detached) because sales in the other two categories (Townhouse and Apartment) fall below the 20 sales per month minimum required for separate reporting although they are included in the Residential/Composite figure. I’ve isolated the Sunshine Coast July results in the image below and as you can see the HPI is showing negative results over all six time periods for those two Property Type categories.
What really caught my attention in the HPI data table were the Benchmark Price figures because of the trend I’ve noticed in sale price figures for single detached home on the Sunshine Coast over the last few months. I decided to take a closer look at SC Benchmark prices over time and spent a few days gathering data and preparing tables and charts. After viewing the results, I decided it would help to compare them to Average Sales Price and Median Selling Prices to see how they fit into the grand scheme of things. This post is my attempt to understand these three different ways RE sales data is reported in this one real estate market - the Sunshine Coast.
Average Sales Price (ASP)
It is my impression that of the three means for reporting residential sale prices the Average Sale Price is preferred not only by the general public, but by realty offices and agents. I have created a table and chart showing the ASP for SC single detached home sales starting at October, 2010 (earliest figures I have) and ending with July, 2013.
Scroll to just bring up the table into view for now and let’s look at the data. We see that in late 2010 average prices were above the half million dollar mark; in 2011 and 2012, prices below half a million are appearing but we’re still feeling optimistic and will ignore that crazy November 2012 figure; however, in 2013 only one month out of the past seven reports the average sale price above a half million and there is another ugly figure for January 2012 but we can rationalize that, too, because December 2012 was so positive. Now, because I have set up a graph showing the ASP over time, we can see a downward trend developing; but, it is highly unlikely the public will pick up on this given the way the ASP is reported on a month-to-month basis.
The red line on the graph is the median mark for all the ASP data and that median is $480,613. On the whole according to this graph, it appears the ASP for single detached homes on the SC falls somewhere in the $425,000 to $525,000 range. Now, the thin, black trendline indicates the ASP is eroding and that could be picking up steam; but, again the public won’t know this unless they're plotting the data themselves.
So, based on this chart, if you were putting your single detached home on the market which you bought for around the half million dollar mark and therefore priced it accordingly you might feel somewhat confident it would generate interest. Now, has anyone come to view it? Have you received any offers? I would guess the answer is no on both counts and to understand why I’ll show the graph again and this time will compare it with another SC single detached homes sales graph (Note: SFD & SDH have been used interchangeably).
Million dollar plus detached home sales are included in the Sunshine Coast ‘Average Sale Price’ data and we can see their impact for the years 2012 and 2013. You can see how these few sales per month distort the ASP figures and if you were to remove them the average prices would drop below that current median mark. The only exception to this would be the month of December, 2012 because its few sales were in the $400, 000 to $800,000 range.
I would point out that the ASP for July which you see dipping below the June figure includes four million dollar plus single detached sales. Now, what would happen to the average sale price for July if these sales were removed?
In a market like Vancouver, where single detached homes priced above a million dollars is the norm the graph results wouldn’t be an issue; but, on the SC where the majority of single detached homes are valued at a half million dollars and below and where million dollar plus valued homes are “atypical” (and their sales are few and far between) then including the latter in the average sales price calculations each month should stop and/or they should be reported separately. This won’t happen, of course. Who wants to start chewing ice cubes when everyone is feeling so good?
Median Selling Price (MSP)
I am now going to look at a second method of reporting residential sales via the “Median Selling Price” and this information is included in every REBGV Monthly Stats Package. Calculating this figure is quite simple. If you were doing it by hand, you take all the sales data for the month say for single detached homes and put them in either ascending or descending order and pick the price that falls in the middle. That’s it - real simple especially if you’re working with an ‘odd’ total series of numbers - for example a total of 23 figures. With an ‘even’ total, there would be a calculation involved.
The July sales in Robert Creek offer a perfect example of how this works. In July, there were eight detached home sales and I have arranged them in ascending order in the table directly below. If there were only seven sales, the median would fall exactly at $499,000. However, since there were eight sales I had Excel do the calculation for me and the result is $539,450.
The Sunshine Coast 2011 - 2013 SFD Median Selling Price data table follows the Roberts Creek table. I have calculated the ‘median’ of these median prices and an average for the whole table and did the same just for 2013. The graph below plots the table data and the red line is that overall ‘median’ price ($395,000).
As illustrated by the Roberts Creek table the median selling price removes the few really low and high selling prices each month thus offering a more ‘balanced’ view of what buyers seem willing to pay for single detached homes. When we look at the graph, we now see that between February, 2011 and July, 2013, the median selling prices moved between a low of $375,000 and a high of $425,000 and this range is roughly $100,000 less than what the ‘Average Selling Price’ data indicates.
Now, let’s look at actual SC sales data for July in the image below. The table on the left shows the majority of single detached home sales occurred in the $300,000 to $399.000 price range followed by the $200,000 to $299,000 range and this pattern is more dramatic in the YTD totals. This shows that the Median Selling Price data, as well, is failing to adequately illustrate what is occurring in the SC real estate market. So, what are your thoughts on Sunshine Coast Average Sales Price reporting now? Is it really starting to stink?
The table in the middle shows the prices paid for single detached homes in Gibsons, Roberts Creek and Sechelt during July (million dollar plus sales removed). The sales in Halfmoon Bay and Pender Harbour have been so poor that I went back as far as March to get a good sampling (again, million dollar plus sales removed). Personally, I am beginning to think that Pender is the bellwether for the whole Sunshine Coast. The SC real estate boom began here; the insane pricing began here; the crash began here; and now the price drop is beginning here.
So, let’s take another look at those July Benchmark prices and compare them with that sales price range table on the left and Pender Harbour’s Average and Median sales prices in the table on the right. Isn’t that interesting? Now, you can see why those Benchmark Price figures grabbed my attention. Next, we’ll take a closer look at that Home Price Index data.
to be cont’d...
ASP is a true extrovert. He’s the life of the party. He’s loud, he’s funny and because he accepts no boundaries the other two expect to carry him out of the bar as they usually do every month. He works in the marketing department of a local professional sports team. He sets new records every year in corporate ticket sales because no one else can match his ability to make a losing season sound like a winner. Everyone loves to be around ASP.
MSP is also an extrovert and appreciates a good time, too. However, being slightly more pragmatic than ASP, he has learned that life tends to run more smoothly if you set personal lines in the sand that you won’t cross. For example, because he hates puking and wants to walk out of the bar on his own two legs, he knows when to cut off the alcohol and start chewing ice cubes. People tend to respect MSP even when they don’t know his profession. He is cop.
BMP is the night to the other two’s day. He is an introvert. Whereas the other two appreciate the physical aspects of the game, he loves its history; but, above all, the math. He needs to keep is head clear. He is the designated driver. He leads the statistics department of a large auto insurance company. He learned early on to slightly fudge his profession when asked what he does - most people will walk away in disgust if they hear the truth. People believe the stats are not to be trusted; they believe the stats favour the industry. He believes that is purely an emotional response which is why he places his faith in numbers. His nickname is Spock.
******************************
I was going through the REBGV July Stats Package a few weeks back and I stopped at a page that is included in every monthly report. It is a page that I have tended to ignore because I’ve only heard negative comments about its data - it is the MLS Home Price Index page. It gives the monthly HPI figure for 22 designated areas under four different Property Type categories Residential/Composite, Single Family Detached, Townhouse, and Apartment) and shows how the HPI changed over 6 different time spans relative to the reporting month (1 month, 3 month, 6 month, 1 year, 3 year and 5 year).
Results for Sunshine Coast sales appear in only two property type categories (Residential/Composite and Single Family Detached) because sales in the other two categories (Townhouse and Apartment) fall below the 20 sales per month minimum required for separate reporting although they are included in the Residential/Composite figure. I’ve isolated the Sunshine Coast July results in the image below and as you can see the HPI is showing negative results over all six time periods for those two Property Type categories.
What really caught my attention in the HPI data table were the Benchmark Price figures because of the trend I’ve noticed in sale price figures for single detached home on the Sunshine Coast over the last few months. I decided to take a closer look at SC Benchmark prices over time and spent a few days gathering data and preparing tables and charts. After viewing the results, I decided it would help to compare them to Average Sales Price and Median Selling Prices to see how they fit into the grand scheme of things. This post is my attempt to understand these three different ways RE sales data is reported in this one real estate market - the Sunshine Coast.
*******************************
Average Sales Price (ASP)
It is my impression that of the three means for reporting residential sale prices the Average Sale Price is preferred not only by the general public, but by realty offices and agents. I have created a table and chart showing the ASP for SC single detached home sales starting at October, 2010 (earliest figures I have) and ending with July, 2013.
Scroll to just bring up the table into view for now and let’s look at the data. We see that in late 2010 average prices were above the half million dollar mark; in 2011 and 2012, prices below half a million are appearing but we’re still feeling optimistic and will ignore that crazy November 2012 figure; however, in 2013 only one month out of the past seven reports the average sale price above a half million and there is another ugly figure for January 2012 but we can rationalize that, too, because December 2012 was so positive. Now, because I have set up a graph showing the ASP over time, we can see a downward trend developing; but, it is highly unlikely the public will pick up on this given the way the ASP is reported on a month-to-month basis.
The red line on the graph is the median mark for all the ASP data and that median is $480,613. On the whole according to this graph, it appears the ASP for single detached homes on the SC falls somewhere in the $425,000 to $525,000 range. Now, the thin, black trendline indicates the ASP is eroding and that could be picking up steam; but, again the public won’t know this unless they're plotting the data themselves.
So, based on this chart, if you were putting your single detached home on the market which you bought for around the half million dollar mark and therefore priced it accordingly you might feel somewhat confident it would generate interest. Now, has anyone come to view it? Have you received any offers? I would guess the answer is no on both counts and to understand why I’ll show the graph again and this time will compare it with another SC single detached homes sales graph (Note: SFD & SDH have been used interchangeably).
Million dollar plus detached home sales are included in the Sunshine Coast ‘Average Sale Price’ data and we can see their impact for the years 2012 and 2013. You can see how these few sales per month distort the ASP figures and if you were to remove them the average prices would drop below that current median mark. The only exception to this would be the month of December, 2012 because its few sales were in the $400, 000 to $800,000 range.
I would point out that the ASP for July which you see dipping below the June figure includes four million dollar plus single detached sales. Now, what would happen to the average sale price for July if these sales were removed?
In a market like Vancouver, where single detached homes priced above a million dollars is the norm the graph results wouldn’t be an issue; but, on the SC where the majority of single detached homes are valued at a half million dollars and below and where million dollar plus valued homes are “atypical” (and their sales are few and far between) then including the latter in the average sales price calculations each month should stop and/or they should be reported separately. This won’t happen, of course. Who wants to start chewing ice cubes when everyone is feeling so good?
Median Selling Price (MSP)
I am now going to look at a second method of reporting residential sales via the “Median Selling Price” and this information is included in every REBGV Monthly Stats Package. Calculating this figure is quite simple. If you were doing it by hand, you take all the sales data for the month say for single detached homes and put them in either ascending or descending order and pick the price that falls in the middle. That’s it - real simple especially if you’re working with an ‘odd’ total series of numbers - for example a total of 23 figures. With an ‘even’ total, there would be a calculation involved.
The July sales in Robert Creek offer a perfect example of how this works. In July, there were eight detached home sales and I have arranged them in ascending order in the table directly below. If there were only seven sales, the median would fall exactly at $499,000. However, since there were eight sales I had Excel do the calculation for me and the result is $539,450.
The Sunshine Coast 2011 - 2013 SFD Median Selling Price data table follows the Roberts Creek table. I have calculated the ‘median’ of these median prices and an average for the whole table and did the same just for 2013. The graph below plots the table data and the red line is that overall ‘median’ price ($395,000).
As illustrated by the Roberts Creek table the median selling price removes the few really low and high selling prices each month thus offering a more ‘balanced’ view of what buyers seem willing to pay for single detached homes. When we look at the graph, we now see that between February, 2011 and July, 2013, the median selling prices moved between a low of $375,000 and a high of $425,000 and this range is roughly $100,000 less than what the ‘Average Selling Price’ data indicates.
Now, let’s look at actual SC sales data for July in the image below. The table on the left shows the majority of single detached home sales occurred in the $300,000 to $399.000 price range followed by the $200,000 to $299,000 range and this pattern is more dramatic in the YTD totals. This shows that the Median Selling Price data, as well, is failing to adequately illustrate what is occurring in the SC real estate market. So, what are your thoughts on Sunshine Coast Average Sales Price reporting now? Is it really starting to stink?
The table in the middle shows the prices paid for single detached homes in Gibsons, Roberts Creek and Sechelt during July (million dollar plus sales removed). The sales in Halfmoon Bay and Pender Harbour have been so poor that I went back as far as March to get a good sampling (again, million dollar plus sales removed). Personally, I am beginning to think that Pender is the bellwether for the whole Sunshine Coast. The SC real estate boom began here; the insane pricing began here; the crash began here; and now the price drop is beginning here.
So, let’s take another look at those July Benchmark prices and compare them with that sales price range table on the left and Pender Harbour’s Average and Median sales prices in the table on the right. Isn’t that interesting? Now, you can see why those Benchmark Price figures grabbed my attention. Next, we’ll take a closer look at that Home Price Index data.
to be cont’d...