With some discussion on the correlation between the average & median price to million dollar sales, I thought it would be interesting to have a visual interpretation of it.
Below, are the total number of $1M+ sales for Metro-Calgary SFH’s, and its relation to prices.
click to enlarge
With averages, its important to consider not only how many $1M+ properties sold, but what percentage that made up of the total sales. (ie. A million dollar sale will have a greater impact on an average sale price of 10 sold properties than that of 100)
The following graph plots the prices against the percentage that the million dollar sales made up of the total sales for that month.
click to enlarge
As expected, when there is an increase to the percentage of million dollar sales to total sales, there is an increase to the average price.
However, the median price remains relatively unaffected by this since it doesn’t matter whether a property sells for $1 or $10 million dollars, they each have an equal weight in the calculation.
click to enlarge
Example:
5 Sold Prices
$10,000,000
$415,000
$400,000
$250,000
$80,000
Median: $400,000
Average price: $2,229,000
Again, that’s why I prefer the median. It takes care of the upper and lower price anomalies equally.
This is a useful post. I’m surprised how many people don’t seem to understand what the significance of median is.
Anyway, thought I would update my “seasonal” adjusted stats with some new data going back to 2002 (thanks very much to Mike F)
The story it tells:
Listings are still ahead of pace, sales less so. With pending numbers moving much higher this week I think sales will be ahead of the usual February-March period this year. The S:NL ratio is slightly bearish, but hasn’t moved much from where it should be compared to February.
Inventory climbed much higher than expected in February, but it’s slowing down now, maybe as sales are picking up.
Most interesting, if you look back to 2002, the average (mean) price increase from February 28 to March 31 suggests we should be at a mean of 475000 and a median of about 420000 at the end of this month. I don’t expect that to happen, but I do expect people to blame it on expensive homes if it does – and this of course is always true. Looking at the pending data, maybe I am not so far off the mark.
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Mike Fotiou says: Thanks for sharing this with us! Much appreciated!
Nice post Mike. “Again, that’s why I prefer the median. It takes care of the upper and lower price anomalies equally.” agreed. What bugs me most is I just wish other media agencies and realtors were like you and think the same way rather than jumping on “X is better this month over Y, let’s wag that tail” The Calgary Herald is the worst.
On a side note I follow the under $300k SFH housing market too as this is the “grass roots buyer” and noticed we currently have over 245 SFH listings under $300k. We even have a detatched 1100sq/ft 3 bd home for $199 which we didn’t have for a while now (needs work), or a perfectly good 80′s 3bd home for $234 C3402274 . Last year we had a 300ish sq/ft $199k teardown in Ogden to compaire.
Good to see the there are some prices in the lowest band dropping too.
I always found what is happening to prices in the NE dictate the other quadrants. NE and lower SW were within 10% of each other (ie. Erin woods and Millrise or Brentwood).
Only a month away now till tighter mortgage rules come into effect and a little over 2 months till interest rates start to go up. Sellers will want to unload before this happens, buyers should say away till it happens to get more for their $ or avoid possible negative equity.
Mike
Mortgage rules just got tighter today for the self-employed and commish based for a mortgage:
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2010/03/insured-stated-income-programs-tighten-up.html
This is a good trend, tightening mortgage rules will help everyone. (parents can feel their kids will be able to afford homes in the future).
Still need to get rid of the 5/35 though IMO.
Mike
Hey Jimmy just wanted to say thanks for posting your seasonally adjusted stats, I enjoy reading them.
Just noticed this while doing the CMHC fees. Anyone see this before?
http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm
Premium on Total Loan
Loan-to-Value
Standard Premium 0.5% – 2.75%
Self-Employed without 3rd Party Income Validation 0.8 – 6%
Wow, the self-employment mortgage insurance is almost DOUBLE in fees! ($400k at 5% down = $12,600 vs $24,600!)
With the self-employment “jobs” growing daily in Canada RE is getting less affordable.
Mike
P.S. Just noticed this surcharge too:
Extended Amortization Surcharges
Greater than 25 years, up to and including 30 years: 0.20%
Greater than 30 years, up to and including 35 years: 0.40%
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Mike Fotiou says: Canadian Mortgage Trends writes about it some here
Mike Fotiou says: Canadian Mortgage Trends writes about it some here
Thanks Mike. What an interesting 2 months this is going to be coming up…
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