Beware The Median Price

[Peterw]

Willair, you are right, the period 1994 to 2000, if not 2001 in the inner south eastern suburbs of Brisbane was as flat as. Also during the time, any one that bought new property, also saw their rents decrease. Sadly, all they had to do was hold a little longer. While there are people that talk about a 7 year cycle, and other 10 years, from "my" reading, the dynamics have been different every time, so its hard to say .... "this" was/is the trigger for the next "increase". Sadly, the media use the median figure when they do their stories, so thats what people understand. There is no way of knowing, what capital improvements etc, in a suburb, have contributed to the increase, unless you have access to a few properties, and can monitor their movement in sales values against any "capital" improvements etc. I recall some one telling me, when I was young, compare investing, to being in the lift foyer of a great hotel. Every one present will have a point of view, as to which lift will reach the top floor first. Picking the wrong one, may cost you some lost additional income, not picking one ... well .....
Oops I will get paid out on now ... grin

 

[Garry Mac]

It's free advertising for you and it's clearly in your interest to flaunt your wares, so to speak. One would have to take whatever you say with a pinch of salt given that you have an agenda of your own.

It's no wonder you don't like clients looking at lower and upper quartile medians - with this information they may not need your services. I've done well using medians to give me guidance that helped me on my way. If people used upper and lower quartile medians when investing in the larger suburbs, they will never end up paying too much.

You are entitled to your opinion. However please don't mis-quote me. Go back and read by post and let me know where I mentioned "lower and upper quartile medians"!

 

[meconium]

You are entitled to your opinion. However please don't mis-quote me. Go back and read by post and let me know where I mentioned "lower and upper quartile medians"!

You are being mendacious. You've simplistically dismissed the median as a worthless tool. Serious investors would need to look at upper and lower quartile medians to get a good feel for the market - something you never mentioned when rejecting all median data out of hand.

Without stats like medians, turnover time etc investors would have to rely on people like you for so-called guidance. I'm sure you'd like that - more commissions for you.

i i look forward to Sim banning me as well.

You make a good contribution to these threads. The OP on the other hand seems to want people to abandon all stats and turn to him for guidance. That's the difference between you and him.

 

[Piston Broke]

You've simplistically dismissed the median as a worthless tool.

Actually he's saying there are 2 methods, and it's "personal choice which is more accurate". Maybe he did'nt do maths at school or sumfink.
First he tells us it's not that good, then he tells us he's been using one type and that it's "quite reliable". It's a 2 way bet.
I'm the one categorically stating they are not only worthless used alone, but misleading and wrong regardless of method.

Without stats like medians, turnover time etc investors would have to rely on people like you for so-called guidance. I'm sure you'd like that - more commissions for you.

Those dodgy medians have been the best tools available for a spruiker, as the bias is to go always up.
Show a noob a median chart of RE that always goes up, tell them "you cant go wrong", "RE never goes down" and show a resiwank chart to prove it.

These days the needed data is freely available for anyone who wants to find it.
But let's face it, in "real life" the wealth distribution wont change much.

 

[Garry Mac]

Thanks for the heads up Garry.

No doubt many newbies here will learn a lot from that post.

Nice self promo by the way!

I've been bangin' on for ages about the same thing actually. When the word median is used, most people conjure up this figure of the average house and what most of the houses are worth in an area.

I see it here in Dromana where I live all the time.

The majority of houses actually bought and sold here are yer houses to be used as elcheapo holiday homes - cause that's what most folks who want one can afford. A good number in recent years are for families moving in, but these are still in the lower end of the price range mostly, because most families around here are trying to simply make ends meet each week. So, the median stays low.

But, there are loads of very nice homes - and plenty in the upper end market of price, which have gone up in value a good deal. But of course; there are a lot less folk around who can afford to buy a you-beaut holiday home, and those who buy them usually hold onto them for a long period. There are way less sales at the top end of price range in our area - less folk around with loads of coin.

So, we end up with a median which tells everyone that the houses are worth X - a fair bit lower than what yer average house is actually worth down here. This will happen in every suburb of course.

All it takes is for a glut of sales to occur in a particular price range in a small period of time, and the median changes to suit that. The media pounce on this as an indicator of market movement, but it is at best; a myopic view. The prices of the other houses haven't really moved either way.

So, this is merely the perception, which people will listen to who hear these reports on the news/media, while the reality is something different.

Some very good points...thanks Marc

 

[meconium]

Actually he's saying there are 2 methods, and it's "personal choice which is more accurate". Maybe he did'nt do maths at school or sumfink.
First he tells us it's not that good, then he tells us he's been using one type and that it's "quite reliable". It's a 2 way bet.
I'm the one categorically stating they are not only worthless used alone, but misleading and wrong regardless of method.


Those dodgy medians have been the best tools available for a spruiker, as the bias is to go always up.
Show a noob a median chart of RE that always goes up, tell them "you cant go wrong", "RE never goes down" and show a resiwank chart to prove it.

These days the needed data is freely available for anyone who wants to find it.
But let's face it, in "real life" the wealth distribution wont change much.

I see what you mean about spruikers selectively using median figure to justify their own ends. Appalling. The same is often done by superannuation salesmen using the ASX's All Ordinaries Index. The crooked buggers come up with a 70 year graph of the All Ords when the index itself was only recently created, back in 1980.

Back to the OP. I'm uncomfortable with his attitude which goes something like this: "ya don't need any numbers. trust-me-i'm a buyers agent and i know best." Investors need to work with stats and having median figures for both upper and lower quartiles is often very helpful. Anyone who disregards stats does so at his or her peril.

 

[Piston Broke]

It's easy to believe a lot of what your read early on in the investment world.
Slick charts and presentations, the fancy labels "expert" and "institute" etc.
TV interviews, books written blah blah.
I do admit to believing some of it too though fortunately I had enough data (when there was no internet) to work with that I soon realized it did'nt make sense to me.
>20yrs later and with much more real data to work with, I'm sure it don't make sense.
Imagine using a median method to chart CG of shares, or share sectors.
It would go like this:
"The avg share is $5, so ABC & Centro at $4 is buying at 20% below market value, and instant gain of 20%".

"ya don't need any numbers. trust-me-i'm a buyers agent and i know best."

You still have to "give them a bone".
A few charts, some 2 way bets, and a little disclaimer, and special offer.
I've seen enough of them...

 

[meconium]

or share sectors. .

Don't get me going about this topic. I have spent thousands of hours trying to figure out the different GICS sectors and how to benefit from mispricings within sectors. It's very frustrating when companies that have nothing to do with a particular sector are included when calculating indexes.

 

[Peter Parker]

Case 1534 of why median statistics are rubbish (if numbers are small):

According to this Chelsea's median for units is nearly $1m while houses are less than half that in July 2010!

http://www.rs.realestate.com.au/cgi-bin/rsearch?a=sp&s=vic&u=chelsea

Normally units in the area sell for only $300 - 400k.

 

[Andrew_A]

Brisbane medians

Some more examples of misleading medians.

A selection of suburbs with changes in median from March 2009- March 2010 with actual resale price data changes for comparison.

Clayfield -6%, 11%
Springfield -2%, 7%
Minyama (Sunshine Coast) 48%, 8.8%
West End -4%, 9.7%

source: Matusik

 

[skater]

It's funny how this forum works.

If someone joins the forum and does nothing but advertise, they're shot down for spamming and criticised for not contributing to the collective knowledge here.

And yet, if someone joins up and does contribute something of their expertise... they are still shot down for spamming. An inconsistent message?

Forgive me, meconium;

I don't understand the difference between Garry Mac posting his thoughts here, compared to say, Prop or Jacque or Andrew, who are generally allowed to post and contribute as they please? Many mortgage brokers do this as well in the finance threads. I'd imagine that all of these people would have considerable expertise to offer, given their day-to-day dealings in the market, and I think that the forum is enriched by their presence.

I guess what I'm trying to understand, is why you took exception to Garry, in particular. Or, is your suggestion that anyone who might be involved with a business that could benefit from posting about real estate, should be banned...?

I have to say that I agree with James.

I am one of the first to jump up and down when a newbie comes on here just to sell their wares. This is outright spamming.

However, Garry has made an attempt to contribute. Whether or not his advice or opinion agrees with your own does not really matter. He hasn't jumped on here and said the equivilant of "Come to my seminar! Use my services! or any other spamming tool (which would probably have the post pulled or him banned)". He has merely given his thoughts on median prices. Many other forumites have some kind of Business that will benefit in some way from them making contributions here, the difference is that those that benefit don't do it with that soley in mind.