Realtors feel the need to explain the housing market. It helps buyers and sellers to understand the market and it lends credibility to the realtor. Early in 2013, the challenge is to explain a market where the average sale price increased from $287,566 in 2011 to $307, 172 in 2012. It is up $19,606 or 6.8%. Does this mean my house is worth nearly 7% more than in 2011. No! Realtors use comparable sales to estimate the price of individual houses. Formulas just don’t work. When looking at individual houses, prices are almost flat, up a bit. So why the big increase?
Some Realtors look at the sale of expensive houses. In 2012, there were 2 Red Deer properties that sold for a million plus dollars. In 2011, only one Red Deer property sold at more than a million dollars. That one extra sale is not going to raise the average much. The top 10 sales in 2011 went from $690,000 to $1,078,00; the top 10 sales in 2012 ranged from $820,000 to $1,090,000. Sure 2012 saw the sale of more expensive houses sold but those ten sales won’t raise the average by $19,606. In fact, the top 17% of 2011 sales involved 95 million dollars. In 2012, the top 17% of sales took 108 million dollars. The difference, 13 million dollars,doesn’t work out to much on sales of 1563 homes in 2011 and 1733 in 2012. I tried, imperfectly to see the impact of the top 17% of sales and found that they raised the average sale price by $45,000 in 2011 and $47,000 in 2012.
So why is there a much higher average sale price. Prices go up by inflation, about 1.6%. The average age of houses sold in 2012 was 1992.5, up 0.7 years from 2011. Sales in 2011 were nearly balanced between high and low prices. In 2012, sales skewed high; in statistic s that just means that there were more above average sales than below average. These sales were in the upper middle, not in the high ends of our Red Deer market. And 2012 saw 1733 sales versus 1563 in 2011.
So how do I explain higher prices? Houses were newer; houses went up by inflation; there were more houses sold in the upper average prices (but not extremely high prices). And finally, houses increased in average, a bit, maybe 3 to 4%. That is my best take on prices, but know this: my statistical training stopped after one university degree. Life is complicated; pricing houses is just as complicated.