Basic Real Estate Statistics Explained
We are going to define some of the basic real estate statistics that are published regularly. To do this, we will use a real estate market, located in Hood County, Texas. Even more granular, we’ll use the single-family numbers for homes in Granbury Tx, a small city of about 8,000 residents that has seen substantial real estate growth in the last 12 months. When reviewing real estate statistics, it’s important to use a large enough set of numbers to be consistent, but granular enough to tell your story.
The statistics to which we will refer are true and accurate for the year discussed, but are used to define the real estate statistic itself.
We have chosen Granbury Tx as our example because the growth of the local real estate market makes static stand out.
Anytime you’re evaluating statistics, especially in real estate, the source of the numbers is extremely important. In most cases, the MLS (Multiple Listing Service) provides the most accurate numbers when it comes to real estate. This is because they have all the listings for all the local realtors in their database. For the sake of explaining the data, we’ll be looking at the Granbury Tx home sales figures, straight from the MLS. These numbers are meant to give an example of how to read the statistics themselves. Anytime you’re evaluating real estate numbers, it’s important to pay close attention to how the numbers are compiled. In this case, we will be using ONLY single-family properties in the City of Granbury.
Basic Real Estate Statistics
- number of sales – This one is self explanatory. It is simply the number of single-family homes sold in a particular month. As of January 2015, they had 51 single-family homes sold. One thing to pay attention to when looking at this statistic is that they are using the contract date or the day the property actually closed. These two dates are typically between 30 and 60 days apart, so it’s critical that you know which one is being referenced. Also, many of the houses that are calculated, if you are using the “under contract” number, may not close! In our example, we are using the number of houses that actually closed. In January 2016 they had an increase of more than 49%, bringing the total to 77 from 51. You rarely see growth of that level.
- Sales volume – Sales volume is simply the total dollar amount spent on single-family homes within that month. Once again, when reviewing this statistic, it is important to maintain consistency of property types. If you are comparing two areas to see which has grown more and you include vacant land in the number for one area, you should include it in the other area as well. As mentioned above, our examples only include single-family properties. With Sales Number looking at units, you would expect Sales Volume to increase appropriately, but in this case, it increased even more than units (by percentage). Total sales volume for single-family homes in Granbury for January 2016 was $15,191,500 compared to the January 2015 figure of $9,281,915. That’s an increase of more than 63%. Because sales volume increased at a higher rate than the number of units, this reflects that median home sales were much higher in 2016 than in 2015.
- Months of Inventory – This is a commonly referred to statistic when examining a real estate market. This statistic refers to the current rate of sales, how long it will take to sell through the existing level of inventory. This reflects the supply and demand of the market. In our example, in January 2015 the inventory level was 9 months and in January 2016 it had dropped to 6 months. That’s a 33% drop in available inventory! This means that if you are looking to buy a home in Granbury Tx, it will be a bit more difficult in 2016 as there is less inventory available to purchase.
- average days to sell – This statistic simply refers to the time it takes to hire single-family properties. Don’t let the “sell” confuse you. To accurately show demand for active housing, you really want to track how long it’s been “under contract.” The process of getting final lender approval, insurance, and reaching a closing can vary based on a variety of factors. In January 2015, the median days to sell was 88. That number dropped by over 30% to 61. Again, this tells you that if you’re looking for homes in Granbury TX, you better get your offers! quickly as the most desirable. houses go fast!
- Average price – This statistic can be derived in several ways. We will use it in its crudest form and it will simply be the median home price. exhausted within that month. Be careful when looking at this stat printed anywhere, as the way the user defines the sale date may vary. It goes without saying that the median price can be used for active homes for sale or homes that have sold. The median price of ACTIVE homes for sale is generally a pretty useless number, since you can list a home for any price, with absolutely no chance of it selling. Many homes listed for sale are unrealistically priced, so the median price of active homes for sale can fluctuate wildly and provide little insight into the market. You’ll want to look at the median price of homes SOLD. In January 2015, the median home sale was $181,998 and jumped to $199,888 in the same month in 2016. This is an increase of almost 10%. This is not a number that really counts the increase in home values across the board, but simply out of the homes sold in that month, what was the average.
- Half price – The median sales price of homes can be skewed by a variety of factors. All it takes is a $5 million home sale to throw up those numbers. To get a better view of the overall increase in value, it may be best to look at the median sales price. The median sales price takes the number that is perfectly in the middle. For example, if you have 11 houses that you are using in your statistics, you would take the sale price of the sixth. This leaves 5 homes sold higher and 5 homes sold lower. In this case, they are pretty close as the average sales price increase from January 2015 to 2016 was 9.69%. This shows that we didn’t have the average price being too skewed due to an extremely large or extremely small sale.
There are hundreds of ways to look at the same numbers, when referring to real estate, so be very careful to read the fine print about exactly what numbers they are using. When doing comparisons, you’ll want to be absolutely sure that they’re both referring to the same property types, dates, etc. As the old saying goes… there are lies, damn lies and statistics.