Sponsored Links

Reported Prices Rise While Asking Prices Fall, But How?

Newspapers Choose To Ignore Simple Math

The San Francisco Chronicle today reported "Bay Area's housing prices buck national trend", but that is just not true. In fact, it's an outright lie. With a 3% decline in asking prices, Bay Area housing prices fell more than the national decline of about 2% over the last year. That is absolutely not "bucking" the trend downward. It makes you wonder just how much realtor advertising money it took to get the Chronicle to spin the headline that way. I think the Chronicle sold its integrity way too cheaply.

Asking prices have fallen in the Bay Area over the last year, and they are still falling. So how can the Chronicle report something like that and get away with it? The answer lies in the definition of the "median sales price".

The median sales price is defined as the sale price in the middle. Half of houses sold for more than the median, and half sold for less. Houses that don't sell are ignored. No sale, no price! So what happens if the lower half of houses just don't sell at all this year? Ah, now the median is the number in the middle of what used to be the upper half of the market. And that's just want happened. Sales volumes fell dramatically, and it fell at the low end of the market. Those sellers cannot get the prices they are asking. In the upper half of the market, houses are selling, but only if the price has been reduced.

Voila! Prices fall all around you, in fact, they fall for every single house in the Bay Area, but when you just don't sell any houses worth below, say, $600,000, the median rises. It's like magic, no?

In fact, we can easily raise the median income of the Bay Area the same way, even if everyone gets poorer! All we have to do is fire everyone who makes less than the median income. If we stop counting them because they have no income (like the Chronicle ignores houses that did not sell) then we could even have a $10,000 drop in the income of every person still employed, and yet show that the median income rose!

Realtors are desperately trying to get you to sign away your life's earnings in a falling market, and dishonest newspapers are helping them. Don't do it! It's a horrible time to buy. Patience will be rewarded.

I have plotted all the Craigslist asking prices for Bay Area real estate over the last year for a more realistic view. Do you see a rise? I didn't think so.

Visit http://patrick.net/housing/crash.html for much more.