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The Merits of Real Estate Appreciation Methods

Posted By Wally Reule @ Sep 12th 2015 3:33pm In: Miscellaneous

There are several ways to look at real estate appreciation, including Average Sales Price, Median Sales Price, Average Price/Sq ft and Median Price/Sq ft. Ah, but which one to use. Here are some guidelines.

Average sales price tends to give too much weight to luxury home sales while median sales price does the opposite, giving too much weight to the cheapest homes. Our favorite is average sales price per sq ft. Though not perfect by any means, it is usually the best compromise solution.

You then need to determine what period of time you will take your measurements over: 1 month, 3 months, 6 months , 12 months, etc. Short periods tend to give you very large variations from month to month, especially if you are examining a small market segment (by location or price for example).

To avoid the volatility, we tend to prefer a long time period such as a year. Our preference when we are looking at areas as small as a single ZIP code is to use annual average price per sq ft. and compare today's value with that from 12 months earlier. 

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