Appreciation, is it real?

Appreciation, is it real?

by Steve Meyers

On the surface, the generic statistics given to reporters and the media may be correct.  The single statistics that are accumulated by the aggregators of this information like Zillow and provided to reporters and the media leaves out an explanation of how these statistics can be misapplied or mis-interpreted.  Here are two examples.

In downtown Seattle if you were to compare the sale of two-bedroom condominiums over the last 12 months the appreciation may be reported to be, say twelve percent (12%).  So, if in June, 2015 the average sale price of 2 bedroom condominiums were, say $700,000 and in June of 2016 the average sale price of 2-bedroom condominiums were $784,000, that would be your 12% appreciation.  However, when you understand that Tower 1 of the new Insignia Condominium Project closed a significant number of 2-bedroom units during that same time frame with sale prices between $800,000 and $1,000,000, that will skew the average sale prices of other condominium projects in downtown Seattle.  What was the appreciation in those existing condominiums, say 5% or 6%.  I don’t know but, it wasn’t 12%.

Let’s look at single-family homes in the Ballard Neighborhood.  If the media reported the appreciation rate of single-family homes went up 14% in the last 12 months in Ballard, that would be wonderful.  However, if you take out, or consider, there have been a significant number of single-family homes that were purchased by developers to construct 3, 4, and even 5 townhomes on those single-family home sites, how will that skew the appreciation rate?  If your Ballard home were outside the areas in Ballard that allowed the re-development of your single-family parcel into 3, 4, 5 townhomes, would your site have increased in value by 14% …. No.

Granted, there has been significant appreciation in the two sectors above but, the statistics reported to reporters and the media by the aggregators of this information is many times incorrect because they take a broad brush look at the prices and have no idea what other things to consider.

If you have any questions or comments about this article please contact me.  Steve Meyers, Managing Broker, Keller Williams Greater Seattle, (206) 972-3328, smeyers@kw.com

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