Consumers have access to more information on a variety of topics including real estate than ever before.  Since obtaining my real estate license in 2000, I have been a keen follower and purveyor of real estate statistics.  In my opinion, having access to and sharing meaningful, detailed information about what the real estate market is doing is one of the key aspects of our profession that consumers have come to need and expect in order to make informed decisions about selling or buying property.

One piece of statistical real estate data that I have long opposed to talking about is the term “average price.”  Virtually very month, online, print as well as radio and television media provide reports to consumers relative to real estate sales activity often touting how much the average price for homes has changed and its usually an increase.  This needs to stop.  Without a detailed analysis relative to a particular market, price range or housing type, “average price” for the most part is a meaningless number.  Worse, it gives consumers both buyers and sellers, false information about what is actually happening with respect to pricing with many home owners believing their home has increased by  “X” percent based on what the media is reporting the average sale price did last month or year to date.  This may seem like a bold statement but as both a real estate Broker and Market Value Appraiser let me explain.

Year to date MLS® single family home sales in our area as reported by the Southern Georgian Bay Association of REALTORS® through to the end of February totalled 169 homes compared to 155 home sales in the first two months of 2019, an increase of 9%.  The total value of these sales is $115.4 million which is an increase of 25% over the $91.9 million sold in the same period last year.   The fist question one might ask is how can dollar sales be up 25% while unit sales are up just 9%?  The answer is it is all about the mix of sales by price range. The next question is, how does this affect the “average” sale price?

By taking the total dollar value for each year and dividing it by the number of homes that sold we come up with the following simple analysis:

Total 2020 MLS® single family home sales of $115.4 million divided by 169 sales yields an average sale price of $682,785.

Total 2019 MLS® single family home sales of $91.9 million divided by 155 sales yields an average sale price of $593,267.

In summary, the average sale price to purchase a home in our market would appear as per above to have increased  by 15%.  This would lead many home owners to believe that their home has increased in value by 15% since this time last year.  Yes, we would all like to believe that our homes have appreciated in value and while many do, the increased value cannot be attributed simply to an increase in the “average” sale price within our market, province or across the country as a whole.

At any given time the average sale price is impacted substantially based on the mix of homes sold across the various price ranges in any given month or year.  In our market, we have seen a sharp increase in MLS® home sales priced at the upper end of the market ie: $800,000 to over $2 million.  Unit sales this year in three of these four price ranges are up 120% to 150% from this time last year.  This alone has served to drive the average sale price for MLS® single family home sales in the area higher, not inflation, lower mortgage rates or value appreciation.  The chart below illustrates sales in these price segments for the first two months of 2020 compared to the same time last year.

Year-to-date there have been 45 MLS® single family homes sold over $800,000 compared to just 22 sales in the same period last year, an increase in unit sales of 105%.  Total year-to-date MLS® dollar sales for homes price over $800,000 amounts to $53.4 million up a hefty 86% from the $28.7 million that sold last year at this time.  That would lead one to believe that the MLS® “average price” would have jumped substantially as well but such is not the case.  While the average sale price in three of the four price segments crept up slightly, there was only one sale above $2 million this year versus three last year and that price was almost 9% lower.  When combining all of the sales together, the average MLS® sale price from homes priced over $800,000 overall dropped by 3% from $1,552,681 to $1,508,814 see below.

So what does this mean overall?  As mentioned above, looking at the total number of MLS® single family home sales in 2019 versus 2020 suggests the average price for a single family home has risen this year to the $682,785 from $593,267 or 15%.  We can’t ignore however the fact that homes priced over $800,000 have increased 86% in 2020 and this has a profound impact on the validity of relying much if any on the term “average” price.

MLS® sales over $800,000 in the first two months of 2020 amounts to a dollar volume increase for total MLS® single family home sales in 2020 of almost $25 million.  If we subtract this $25 million increase  in upper end home sales in 2020 bringing these sales down to an amount equal to January through February of 2019, the overall “average” MLS® price for the 169 homes sold in 2020 is not $682,785 a 15% increase, its reduced to $536,675 which is roughly a 21% decrease year-over-year.  Have MLS® home prices dropped 21% this year?  Of course not but again this illustrates the pitfall and unreliability of putting any credence in using “average” prices for anything pother than cocktail party conversation.

In summary, our real estate holdings may be the largest, most important asset that any of us own and they should be treated as such.  Don’t believe the media spin about “average” sale price increases nor should any REALTOR® be referring to this form of pricing when you are listing or buying a home.  I recently heard a colleague defend the price on one of their listings attributing it to a recent increase in average sale prices.  Shame on them.  The average sale price is not based on a thorough analysis by market area or price range of what is currently for sale or recently sold.  It’s inaccurate, misleading and by no means should your real estate decisions be based on anything that is so vague and arbitrary .

As a Broker and Market Value Appraiser I do a lot of research and statistical analysis when working with clients either listing their home or helping them to buy.  Assisting them to make informed and rational decisions when buying or selling a property whether it’s a home, condominium, rural, vacation or commercial property is what they expect.  When  it comes to real estate service, knowledge and expertise,”only the best will do.”  Please do not hesitate to Contact Me for a no obligation consultation about your buying and or selling needs and visit my Free Market Reports page for the latest in market information and statistics which I update monthly .