All Topics / General Property / Median House values: useful or nonsense?

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  • Benny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Median house prices – are they useful , or even believable?  Maybe it is the flood of differing results that confuses me most.

    What about you though – do you use them?  And how do you make them work for you?

    Benny

    Profile photo of StevenSteven
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    @steven1982
    Join Date: 2017
    Post Count: 189

    I hardly pay attention to Medium price.

    I have made the rule to do the following:

    1. Look at “Sold within 800-1500 metres radios in the past 2-3 months” and make offers based on that, as long as the numbers make sense to me. It is up to vendor to accept or reject my offer but it is up to me to make my offer.

    2. Never up my offer unless I am desperate for it

    3. Never buy from auction. If all houses in an area are sold via auction, then that’s not the right area for me to look at. The only exception is if this is an area where I myself want to live in.

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi Benny,

    Thanks for making the post.

    Can I sit on the fence a little bit and suggest median house price information is ‘interesting noise’?

    The challenge is understanding what median house price represents as a statistical measure (i.e. median vs. mean), and how the data is collected and analysed. As they saying goes: garbage in, garbage out, so the data being reported is only as good as the data being captured and analysed.

    The difference in approach accounts for how different data series can provide different values off the same raw data. You really need to be a trained statistician to understand the integrity of each approach.

    What I do is pick my preferred data series, and look at the trend over time, rather than a value in time. The trend provides guidance on how the middle of the market was behaving, as some guidance to how the market is behaving, and how it may behave.

    A relative number in the same data set is useful to make value comparisons: city v. city, city v. region, region v. region, etc.

    However the number, like any number, is just a ‘reading’ on the instrument panel of a property investor’s cockpit. Interpreting what the number means relative to the other dials and levers is where investing skill comes in.

    Another analogy is that median house prices is the view in the rear mirror. That’s helpful. But even more important is looking out the front windscreen and taking notice of what is happening in the market now, and what’s coming over the horizon.

    All the best,

    – Steve

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Thanks Steven. You bring a good practical perspective to the discussion about ways to get more timely and relevant data than a single broad measure.

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Benny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Thanks Steven and Steve,

    I’d long been confused how Sydney could be reported as having a $1.3m as highest median by one company (a few years back now) while others report other lower values as being the highest.  ABS shows $1.05m as being the highest THEY have ever recorded in Sydney (Jun 2017).  Steve, perhaps your comment here serves me best re that point:-

    The challenge is understanding what median house price represents as a statistical measure (i.e. median vs. mean), and how the data is collected and analysed. As they saying goes: garbage in, garbage out, so the data being reported is only as good as the data being captured and analysed.

    The difference in approach accounts for how different data series can provide different values off the same raw data.

    And also, I liked your comment re the “Trend” in median values as having some use.   I recall you teaching to “find a favourable trend” or words like that, and to jump on it.   So yeah, even a dubious median that is updated regularly might provide a reasonable trend to follow, even though the individual posted amounts might be overstated.  True?  Or am I dreaming with that thought?

    Thanks too, Steven – sounds like you’ve found your way without using a median value at all.  And if that works for you, then well done.

    Benny

     

     

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