Data, trends are not always accurate

Welcome back to a bird’s eye view — a real estate column that provides different perspectives on market conditions and a consumer explanation of misunderstood real estate news reports and strategies.

On March 31, an article was published in a local Orange County newspaper regarding ZIP codes in which 83 ZIPs were compared in the last 12 months. It seemed like a great article and created some interest, since most consumers and real estate agents are looking for hope. It made reference to 37 areas of Orange County that were stated higher overall in percentages in the last year.

I read the article, and if I were a purchaser or sideline hopeful investor, I would have looked at this data and sighed. Not in relief, but in frustration. It appears that the market had some hope as the data dictated areas of enormous increase, but on the other hand, some significant decline.

In my opinion, the article failed to articulate how the comparable data were determined and what they really revealed. It left readers with a self-impression of its meaning without regard of the impact it places on readers who depend on what they hear and read to determine their decisions about real estate investments.

After careful review of the market trends and sales, I determined this article showed

that some areas had sales that sold above the last 12 months sales comparisons and what it doesn’t explain is that Seal Beach, for example, couldn’t have had a 111% increase in its overall pricing as most consumers might think.

Yet the example alleges that properties in Seal Beach sold above the average of the last 12 months and that those sales in comparison were 111% higher in value. It alleges that a home listed for $2 million in 2010 would essentially be worth $4.4 million in 2011.

Even areas of Newport Beach, for example, where I live on Balboa Peninsula, reported a downturn of 50%. That would mean a home listed for $3.9 million is worth $1.95 million. It’s not really what I believe nor correct, but nevertheless a consumer expectation and impression that is hard to refute once documented in the media.

So what does all this mean? That data without professional understanding cannot define recovery or doom. And sales from month to month can be skewed by one large sale (mega million-dollar sale) or by multiple small sales where numbers are used in ways to create an article but unexplained as too the real math behind the data.

This article may shed some light on that reason. Only believe what you know or what you can confirm. Articles such as this reminds me of Zillow, where values in our coastal areas are vastly inaccurate — and so is using data and trends that do not give accurate assessments of true market facts.

Source your sales information, make current inquiries to local markets, find resources that are valid and discuss your concerns with an expert. Just to be clear the article was providing information to the public, and I am sure the authors were not attempting to sway the public in any way.

It is just how the data are depicted and how the consumer views the information that creates the need for clarity. However, the way in which this report was portrayed, it appears and sends a mixed message, and like last week’s new homes report we are again faced with information on which we cannot rely.

The local paper that distributed the story is well-versed in these matters, however, in reporting this data I believe that it is critical to report how the numbers match up to reality, and it would be better to report the numbers with understanding of what makes them so vastly different than to report “hope” or “doom” without regard to our recovery.

Every article that hits the news is used in some way to provide insight and interesting data. It is how that data is explained that matters. And I think 37 ZIPs with higher-performance are great, but explaining how it was compiled is critical.

So let’s see how that works. Thirty-seven ZIPs show higher-than-expected sales performance. That means these areas have sold more units at a higher price, not necessarily at higher equity positions. That’s all it means.

The great news is that these areas have sold properties, and that means the market is brisk. Forty-six ZIPs were lower so what does that mean? That means that 47 areas had sales that were lower in price but not necessarily reduced pricing. The great news here again is that there were sales!

What if there were no sales? Would that mean there was no change in the last 12 months? Not quite the result we expected but good question, huh? It would show no change in the area’s last 12- month numbers.

No sales would be more of an article to report and investigate why than areas with sales. But that is another story for another day. As always, trust in the professional and make great decisions when opportunities exist.

That means right now!

TOM IOVENITTI is the former president and chief operating officer of Coldwell Banker. He lives in Newport Beach.