I looked at a new property for sale in Frisco a couple of weeks ago. It’s a cute place and was very familiar to me. I looked up the property history and realized it was familiar because it was on the market last year. It sold for $385,000 and due to the owner’s situation changing it is back on the market for $429,000. Nothing had changed with the property. It wasn’t as if it was a fixer upper last year and was now a gorgeous home. I asked the listing agent why it was priced so high. His response was that the average sales price in Frisco was up 10% this year over last year so his price was just keeping up with appreciation.
10% Increase in average sale price
I checked his numbers and sure enough the average sales price was up 10% over 2013’s average. But does that statistic really mean that every property in Frisco is valued 10% higher now than it was last year? To answer this question we have to look at the data that makes up Frisco’s average sales price. Every sale of every residential property in Frisco is included in the average sales price calculation; from studio condos to million dollar homes and everything in between. The mix of sales has a big impact when calculating the average. If there have been a lot of lower priced properties selling and no high end sales, it will drag the average down. If there have been a lot of high end sales but nothing in the lower price ranges, the average sales price will be higher. The mix of sales has nothing to do with price appreciation in an area. More higher end sales may indicate that the market is getting stronger because more people are spending more money. It could also mean there were fewer lower priced properties for sale. More information is needed to draw any accurate conclusions.
- In 2013, Frisco’s average residential sales price was at $472,654. 68% of the sales were under $500,000 and 2.5% were over $1 million.
- Through the end of May this year the average has jumped up 13% to $536,197. 2.5% were still over $1 million but only 53% of the sales were under $500,000.
Just from looking at the mix of sales, I would expect the average sales price to be lower in 2013 when a larger percentage of sales were in lower price ranges. If the mix of sales were relatively equal, I could see a possible conclusion that there must be appreciation happening. But again, more information would be needed.
The use of statistics
Realize, just about any position can be justified by a statistic of some sort and one statistic never tells the entire story. When you hear random statistics, the question you need to answer is why that statistic is being put out there. In this case, the agent was telling me about the average sales price because he wanted to sell me & my client on this property. Unless a real estate agent is your Buyer’s Agent or Seller’s Agent, they are just a salesperson looking to make a sale. Don’t get sold. Get the facts. Hire an Agent that represents you.