Basic real estate statistics explained.
We’ll outline some basic real estate statistics that are thrown around on a regular basis. To do this, we use a real estate market in Hood County, Texas. More granular, we’ll use single family numbers for homes in Granbury, Tx, a city of nearly 8,000 residents that has seen significant real estate growth over the past 12 months. When evaluating real estate statistics, it’s important to use a group of numbers that are strong enough to be solid, but strong enough to tell your story.
The statistics we cite are true and correct for the year discussed, but are used to describe the real estate statistics themselves.
We chose Granbury Tx as our example because the local real estate market growth statistics there make it 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 listing real estate. Because they have all the listings of all local real estate brokers in their database. To clarify the data, we look at the numbers for home sales in Granbury Tx directly from the MLS. These numbers themselves are to give an example of how to read the statistics. When evaluating real estate numbers, it’s important to pay close attention to how the numbers are compiled. In this example, we will only use single family properties in the city of Granbury.
Basic real estate statistics
- Number of sales – This is pretty self-explanatory. It is simply the number of single family homes sold in a month. In January 2015, 51 single family homes were sold. One thing to note when looking at these statistics is that they use the contract date or the date the property actually closed. These two dates are usually between 30 and 60 days apart, so it is important that you know which one is being referred to. Also, many homes that are listed, if they are using the “in contract” number, may not close! In our example, we are using the actual number of closed houses. In the year In January 2016, they had an increase of over 49%, bringing the total to 77 from 51. Progress to that level has rarely been seen.
- Sales volume – Sales volume is simply the total dollar amount spent on a single family home during that month. Once again, when evaluating this statistic, it’s important to keep asset types consistent. If you are comparing two areas to see which one has grown more, and you include a blank space in one area number, you should also include it in the other. As mentioned earlier, our examples only include single-family properties. When you look at the sales volume, you’d expect the sales volume to actually increase, but in this case, it increased more than the units (in percentage). In the year The average sales price for single family homes in Granbury in January 2016 was $15,191,500 compared to $9,281,915 in January 2015. This shows an increase of more than 63 percent. Because sales volume grew at a faster rate than the number of units, this indicates that average home sales were significantly larger in 2016 than in 2015.
- Months of goods – This is commonly referred to as statistics when analyzing the real estate market. This statistic indicates how long it will take to sell at the current 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 was reduced to 6 months. That’s 33% off product inventory! This means that if you are looking to buy a home in Granbury Tx, it will be a little more difficult in 2016 as there will be less inventory to buy.
- Median days to sell – This statistic simply indicates how long it takes single family properties to go into contract. Don’t let “for sale” confuse you. You want to track exactly how long it takes to go into “contract” to accurately reflect the demand for active homes. The process of obtaining final lender approval, underwriting, and going to closing can vary for a number of reasons. In the year The median days to sell in January 2015 was 88. This number has decreased by over 30% to 61. Again, this tells you that if you are looking for homes in Granbury TX, you better get your offers quickly as they are in high demand. Homes are going fast!
- Average price – This statistic can be obtained in different ways. Let’s use it very literally and simply mean the average price of houses. Sold in that month. Be careful when looking at this statistic published anywhere, as how the user defines the date of sale may vary. Needless to say, the average price can be used for active homes for sale or for sold homes. The average price of active homes for sale is generally a pretty meaningless number because you can list a home at any price with no chance of selling. Many homes listed for sale are priced unrealistically and therefore the average price of the property Houses for sale It can change dramatically and give little insight into the market. You’ll want to look at the median price of homes sold. In the year The median home sale in January 2015 was $181,998 and jumped to $199,888 in the same month in 2016. This is an increase of about 10%. This is not a number that truly tells the increase in home prices across the board, but simply what the average number of homes sold for that month was.
- Average price – The average home sale price can be skewed for a number of reasons. All it takes is one $5 million home sale to drop these numbers. To get a better view of overall price increases, it’s best to look at the median sales price. Average sales price takes the number exactly in the middle. For example, if you have 11 homes to use in your statistics, you would take the sale price of the 6th. This will sell 5 houses higher and 5 houses lower. In this case, the median sales price increase from January 2015 to 2016 was 9.69 percent, so they’re pretty close. This shows that the average price is not too skewed by too many or too few sales.
There are hundreds of ways to look at the same numbers, when referring to real estate, so be very careful to read the numbers you are actually using. When making comparisons, you absolutely want to make sure that both are referring to the same property types, dates, etc. As the old saying goes… there are lies, damn lies and statistics.