Change in median prices don’t inform on housing market direction: RP Data-Rismark

Change in median prices don’t inform on housing market direction: RP Data-Rismark
Larry SchlesingerDecember 8, 2020

Changes in median house and unit prices don’t "inform" on whether the housing market is rising or falling, says Rismark, joint compiler of the RP Data-Rismark Daily Home Value Index.

Responding to a number of articles in the media, including one on Property Observer, commenting on the divergent nature of June quarter housing market data, Rismark says median prices are good for asking questions like: “Can the average wage earner afford to buy up to the 50th percentile (ie. the median) of the houses that happen to be selling in the last quarter?"

“Equally, the 25th or 75th percentiles are just as useful as the 50th for these types of questions."

Rismark says it cannot imagine anyone advocating that an index of the 25th or 75th percentile of house prices (stratified or otherwise) being representative of changes in the value of the housing market.

“However, when it comes to the word 'median' (ie. the 50th percentile) a lot of people seem to become spellbound."

According to Rismark “repeat sales indices” – where the sample of properties included in an index is limited to that sell more than once is a “poor reflection of changes in the market”.

“Repeat sale indices have very low coverage of the dwelling stock which is trading and massively revise, though time as new trade pairs (ie. houses selling more than once) become observable.

The RP Data-Rismark Daily Home Value Index is a hedonic model.

“This index utilises comprehensive information on the attributes and characteristics of residential properties (such as location, land size, and bedrooms) to measure “quality-adjusted” changes in property value over time and to also impute the value of dwellings having a certain set of characteristics (but no current sales price) by observing the sales prices and characteristics of other dwellings which have recently been observed as selling," RP Data explains on its website. 

Click here for RP Data's full explanation of its methodology.

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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