When the Media Got it Wrong. Dead Wrong.
This week, WSFA reported on an article in a business publication called Kiplinger. The local media was covering this national magazine’s piece putting Montgomery squarely number one on a list we don’t want to make at all: the American cities where home prices have fallen the most. According to the report, in the past 12 months home prices have fallen by 14%. 
REALTORS (this author included) are really up in arms. Because no matter where we look for statistical data, we are not seeing that kind of figure — nothing even close!
SEEKING ACCURATE DATA ABOUT MONTGOMERY HOME SALES
My first research stop was www.FHFA.gov. This is the web site of the Federal Housing Finance Administration, an agency of the federal government and a source generally regarded as a great place to go for reliable information on the state of housing in our nation.
The site has a handy little button called Housing Price Calculator. There, you see a place to input the quarter in which you bought your home, the current quarter to which you want to compare, and your purchase price. The result tells you what your home is worth today — or was worth, if you choose a quarter other than the most recent one.
Kiplinger says their data is for the past year, so I entered Quarter 1 2012 and then added Quarter 1 2013 to compare. For a purchase price I used $100,000. Voila — the calculator displayed $97,594. I’m no math whiz, but even I know that a decline of $2,406 is not 14% of $100,000. Try 2.4% instead.
MONTGOMERY HOME SALES HAVE SAGGED BUT NOT PLUNGED
Next I went to my own trusty spreadsheet, which goes back ages and ages. I use it for market-based blog posts here at MML from time to time. It shows how market has been behaving and is reproduced below. I don’t see a 14% decline in any year. Do you?
| Montgomery Market Sales History | |||
| Year | Total sold | Avg Price | Median |
|
6/18/2013 |
1644 |
$ 141,319 | $ 125,900 |
|
2012 |
3504 |
$ 140,914 | $ 126,000 |
|
2011 |
2787 |
$ 125,440 | $ 125,000 |
|
2010 |
3585 |
$ 144,254 | $ 126,000 |
|
2009 |
3358 |
$ 131,654 | $ 129,000 |
|
2008 |
3644 |
$ 136,038 | $ 133,900 |
|
2007 |
5492 |
$ 166,202 | $ 142,500 |
|
2006 |
5951 |
$ 166,460 | $ 142,000 |
|
2005 |
6175 |
$ 153,249 | $ 130,230 |
|
2004 |
5736 |
$ 138,356 | $ 115,900 |
|
2003 |
4946 |
$ 136,432 | $ 115,850 |
|
2002 |
4207 |
$ 129,590 | $ 112,000 |
|
2001 |
3863 |
$ 123,024 | $ 106,900 |
|
2000 |
3655 |
$ 116,747 | $ 100,000 |
|
1999 |
3773 |
$ 115,863 | $ 98,500 |
|
1998 |
3920 |
$ 114,194 | $ 98,137 |
|
1997 |
3360 |
$ 109,115 | $ 92,325 |
FROM WHOM IN MONTGOMERY DID KIPLINGER GET THEIR FIGURES?
The next error I see in the Kiplinger article is their statement that the median home price sold was $86,000. Look at the figures above. They came straight out of our MLS. I see $125,900 year to date. What do you see? Kiplinger purports to have gotten their figures from “realtors associations and multiple listing services.” Yet no one from Kiplinger has spoken either with our association staff or any REALTOR we can find.
To their credit, the journalists at WSFA checked in with our Association President Mugs Mullins. He said what I am saying: “Where in the devil did Kiplinger get their figures?” And wherever they got ‘em, they’re wrong … dead wrong!
Sandra Nickel has been listing and selling residential real estate for over 29 years, most with an intense focus on Montgomery’s Midtown neighborhoods. Sandra serves on the Mid-Alabama Coalition for the Homeless, the Cloverdale Business Coalition, Historic Southview, the Volunteer and Information Center, Landmarks Foundation and her own neighborhood Garden District Preservation Association.
Go get ’em Sandra. When you’ve got the facts, report them. MARA should call Kiplinger’s and give them the facts and find out where they got their numbers. Then WSFA and other media should report the true facts.
Hi, Sandra,
I saw your Tweet regarding home prices in Montgomery. I thought it might be helpful for me to respond here.
As the introduction to our slide show states, our home-price data provider is a company called Clear Capital, a real estate data and analytics company (www.clearcapital.com). Also, the sales and inventory data that I used came from the Alabama Center for Real Estate (ACRE).
The introduction also points out that we are providing data for metropolitan statistical areas. The Montgomery MSA (as defined by the U.S. Census) is comprised of four counties: Autauga, Elmore, Lowndes, and Montgomery. And the data is for single-family homes only.
Clear Capital explains how it tracks home prices as follows: “Clear Capital’s housing statistics are based on a Repeat Sales Methodology, which is significantly different from an average sale price approach and is based on observed price differences for homes that have transacted at least twice over a 19 year horizon. This methodology has been well studied in the field and is the basis for other popular housing indices such as the S&P/Case-Shiller index.”
I would add: Although the Federal Housing Finance Agency (FHFA) also uses the Repeat Sales Methodology, as I understand it, the basis of its data are conforming mortgages backed by Fannie Mae and Freddie Mac only.
The repeat-sales methodology avoids the inherent problem of average and median home prices, which are influenced by what kind of homes are selling. If more expensive homes sell this month than last, the average or median home price will rise. The repeat-sales methodology corrects for that.
A home-price index such as Clear Capital’s allows us to compare and rank metro area housing markets across the country. But, as we all know, all real estate is local. What the individual home buyer or seller will experience in any metro area will depend on what’s happening in their neighborhood and price point.
Hope this helps.
Best regards,
Pat
Pat Mertz Esswein
Associate Editor, Real Estate and Home
Kiplinger’s Personal Finance magazine
http://www.kiplinger.com
@PatEsswein
pesswein@kiplinger.com