Tuesday, December 22, 2009

Beware of Average Home Price Quotes in the Media- Especially SLO county.

When seeing statistics in the news media such as "The Average Price of a Home fell 3% last month in the County",  be cautious of how much that information really means to you.   That is especially true in our location.   Here's why- The average price is determined by taking the total $ amount of all of the sales in the county and dividing them by the number of sales.  Sounds correct enough and it is a correct number.  So, why I am saying why you need to be cautious of using that information?
In a given month,quarter or year, there are larger amounts of certain price ranges, such as smaller homes in a lower priced area  of the county, that will close escrow and that will skew the numbers and make it appear that prices have dropped when they actually have not.  For instance, a large tract of low priced homes in Shandon could finish construction and a very large number of them close escrow in one month  against the rest of the sales in the county and then it could be reported that the average price of a home fell that month and that may  not be true.  Conversely,  an expensive tract of large luxury homes in Avila Beach could finish construction and many close escrow in that month and that would make the statistics appear like prices have risen when that's not true.  In SLO county, we have very diverse areas and extremely different values from one location to another which is not the same as larger urban areas. It is very common for certain areas as well as certain types of properties in our county to be selling better then others at any given time and that will affect the average price of a home value given for the entire county and that may not accurately portray the actual state of the market.
 So, how do you get a handle on what your property has done value wise or what the market you are looking to buy in track record has been?   You want to get an evaluation by looking at what similar sized properties in the same location as yours or what you want to buy have done.  Your local experienced Realtor of choice can do that by using the data we have available to us and by also  our advantage of actually showing and evaluating  properties on a regular basis.   Don't ask a Realtor in Nipomo to evaluate your property in Paso Robles or vice versa.  We may have all the same data by being in the same MLS system but you want to talk to someone who works an area regularly with every day "boots on the ground" experience in your location.  Local experts know how to see the results of the data and then make a more "real time"comparative analysis which will make a more accurate and useful evaluation for you.
 Also, be wary in using some onlite sites such as Zillow.com.   They can be extremely inaccurate in certain areas such as ours and they admit that.  They primarily use cost per square foot valuations within a certain proximity so they give no value to larger lots, etc.   So if a home on 1 acre sold for $400,000 then a same sized home on 50 acres next to it would get the same value, etc.   I sold a home on the ocean front last year which Zillow gave a value to of $654,985.00  and it closed escrow for $1,800,000.00.   That was because their system compared it to homes that were next to the highway 1/4 mile away.
 In conclusion, just remember the old tried and true statement: "location, location, location".

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