Understanding Contradictory Housing Reports
How often do we see reports about the housing market that seem to show that things are improving, only to find another report that seems to completely contradict the first? And how about when two reports "hit the headlines" at the same time, and seem to be covering the exact same issue, yet conclude with different findings?
The key to understanding what appears to be contradictory housing reports is to first study the source of the report, and then the source of the information from which the report was based.
Often times, there might be a bias that one reporter brings to the results that is completely different than the bias of the second reporter. Other times, the reports are based upon different sets of data (or different observations).
Contradictory Housing Reports In Tallahassee
If you are a subscriber to the Tallahassee Real Estate Newsletter, then you received yesterday's report that showed a wonderful 81% increase in year over year home sales in Tallahassee. While this is some very good news for Tallahassee, it seems to contradict earlier reports that showed the growth to be only 30%. I received a few emails from peers of mine asking how this could be.
Well, the short answer is, "both are true". Reports from the MLS in Tallahassee show a year over year gain of 30% when comparing December 2009 to December of 2008. But when I published my report for the same period, the Tallahassee housing market posted an 81% gain. The good news got even better!
Defining The Housing Market In Tallahassee
In order to compare one report to the other, it is important that we compare "apples to apples." My report looks at the housing market, while the cited MLS report considered just single family detached homes. So, why do I combine condominiums, townhouses, and single family detached homes into a category and refer to it as the housing market?
This is an issue that I have covered many times in the past, but it is worth repeating (and not just for Tallahassee but for most markets around the country). The fact is, single family detached homes have moved to a price point that forces entry-level home buyers to consider attached units. Maybe in days gone by could the median home priced home buyer find plenty of single family detached homes in his or her price range, but that certainly has not been the case over the past 8 years.
The price of lots and land in Tallahassee has soared so high that most entry-level homes built in the past 3 years are of the "attached" variety. If we look at the bigger picture, we can basically see the condo/townhouse market is consuming market share from the single family detached market. Because of this, we need to have a combined measurement to get an accurate view of the entire housing market. Were we to study merely the single family detached homes, we would see an eventual decline as the growth of the attached units grew.
Recognizing The Source Data Of A Housing Report
The only time that I use information from the MLS in Tallahassee is when I compare supply and demand. When we want a view of the real and relative inventory of homes for sale in Tallahassee, the MLS is the best source to provide consistent information.
But when I want to really study all the sales that are occurring in the Tallahassee housing market, I purchase data from a provider that goes to the Leon County Property Appraisers office and keeps track of all the homes sold in Tallahassee. This includes REALTOR sales that did not make it into the MLS, For-Sale-By-Owner sales, Builder Sales, and all other non-arms length home sales.
Traditionally, the MLS in Tallahassee contains anywhere from 50% to 67% of the home sales that happen in Tallahassee. That means that if I rely solely on information provided in the Tallahassee MLS, then I might be missing from 1/3rd to 1/2 of all available sales. I consider this omission too large when other options are clearly available.
For this reason, my reports will often differ from those generated from data found in the MLS in Tallahassee.
The MLS In Tallahassee Showed An 84% Gain In Year Over Year Home Sales
The MLS report showed a gain of 30% in year over year single family detached home sales. But it showed a 327% gain in year over year condo and townhouse sales! When you combine these figures, the total housing market (as recorded in the MLS in Tallahassee) was up 84%! That's right, a number consistent with what the tax records show and really close to what I reported yesterday in the Tallahassee Real Estate Newsletter.
If you want up to date market reports for the Tallahassee real estate market, please stop in and check out the Tallahassee Housing Report. Your feedback is greatly appreciated.