Just over a year ago, the folks at Arizona State’s Realty Studies department realized there was a problem in their data. Because of their methodology, they were including failed trustee’s sales – attempted sales following foreclosure where no one bought the home and the property reverted back to the bank – in their monthly sales data.
These non-sales quickly were sifted from the stack, which was an excellent start. But then our protagonists completely missed the point – that these “sales” weren’t sales – and still reported the data. Take the March report …
For the traditional market, the median price in March was $127,000, down 45 percent from the $229,900 for a year ago. Foreclosed properties had a median price of $146,880 ($189,170 for March 2008).
The obvious question is how can you have a median “price” when there was no sale? The price reported isn’t reflective of current value, it’s what the prior owner owed the bank. If market value is the price at which seller agrees to sell and buyer agrees to buy, the figure being reported here as a “sale” is the price at which lender agreed to lend at some point in the past and buyer agreed to assume at some point in the past.
In other words, it’s a meaningless number.
Basic common sense would tell you there’s something wrong. And ASU’s Realty Studies folks try to explain it, all the while somehow ignorning the obvious:
there are two fundamental reasons why the median price for foreclosed homes is higher than traditional transactions.
“The first reason is more expensive homes continue to be foreclosed, with 15 in March, three over $2 million, and 7 percent of the foreclosures were in the $300,000 range,” he said. “The other reason is that, for the last year, slightly more than 30 percent of the traditional sales were foreclosed homes that were sold again with a median price markdown of 15 percent. The markdown varied throughout the Valley ranging from 44 percent in Maryvale to 17 percent in Avondale to 10 percent in Tempe.”
But there is no markdown taking place. Since the original number isn’t really a sale, there is no markdown here. What you have is a home being priced at (or possibly slightly below) current market value. The amount of the mortgage from 2006 is irrelevant.
I’m still at a loss as to the point of the stubbornness regarding blatantly misleading data, but it’s probably not worth the effort to figure out.
[tags]Phoenix real estate[/tags]