“Home prices continue to decline in March” is the big banner headline in the New York Times article.
Minneapolis in particular has suffered a 23% march 08 to march 09 drop in median price, according to case-shiller. It also has the biggest ever recorded single month drop of median prices, 6.1%.
Scary, right? Well, let’s look beyond the headline. In the middle of the article:
As a result, some argue, the Case-Shiller numbers make the market appear worse than it is. Minneapolis is a case in point. Prices there plunged 6.1 percent from February to March — the largest single-month drop for a city in the history of the index.
The area was not prone to the bubble excesses of California or Florida, but it has its share of foreclosures. Until recently, banks tried to hold on to these houses to get the best price, said Steve Havig, president of the Minneapolis Area Association of Realtors.
Overwhelmed, the banks are now taking a different approach: dumping the properties to clear their books, making them “extremely motivated sellers,†as Mr. Havig calls them.
These bargain homes make up nearly half the sales in Minneapolis, and are a big reason the agents’ own numbers show a one-year median price decline of 22.9 percent. That closely matches the corresponding Case-Shiller drop of 23.3 percent. But when foreclosures and short sales are stripped out, the decline for so-called traditional homes is much smaller: 2.3 percent.
“Clearly, there are two different markets operating here,†Mr. Havig said. That can lead to frustration among buyers of traditional houses, who expect better deals.
(bold type and underlines added by me)
So, my math question is: If foreclosures are half the sales, and non-foreclosure sales prices are down by 2.3% while all prices are down 23.3%, doesn’t that mean the foreclosed sales prices are down by about 43.7%?
Are median sales prices of foreclosed homes in Minneapolis down 43.7% and sales prices of non-foreclosed homes down by 2.3%? That’s almost a twenty-fold difference…
And if so, what good are Case-shiller’s median-price indices? Other than to sell newspapers, of course.
Am I missing something? (Always very possible…)
k
Edited 5/31/2009 10:14 pm by KFC