It is important for both buyers and sellers to understand real estate statistics and determine if the data is relevant and fairly represents the real world. I put this post together to offer some insight that may be helpful when analyzing Oahu real estate statistics.
New Developments: A developer’s sales team may upload all sold properties to the MLS, which they do after a project is complete and buyers have taken ownership. For instance, the sales teams for Waiea, Anaha and Park Lane uploaded sold data to the MLS after buyers took ownership, which means:
a) A large number of expensive sold condos flooded the MLS within a short period of time – this may create a false impression of rapidly rising prices within a neighborhood.
b) Days to Sell typically show as 0 – this may create a false impression of properties selling at a faster rate than reality within a neighborhood.
Example: 180+ condos officially sold in Park Lane in 2017 and those sales were uploaded to the MLS that same year. The median sales price in Ala Moana – neighborhood where Park Lane is located – jumped from a little over $300,000 (year 2016) to well above $1,500,000 (year 2017) and the median days to sell dropped from 91 days (year 2016) to 2 days (year 2017). Neither data point fairly represents the trend within the Ala Moana condo market.
Escrow Status: When a property goes under contract (in escrow), real estate agents used to change the status for a property to “Active Continue to Show” or “Pending” within their Oahu MLS data portal. The idea was for agents to select “Active Continue to Show” when a property was still available for showings and change the status to “Pending” once the property was no longer available for showings. In reality, a significant number of agents would select “Active Continue to Show”, even though the property wasn’t available for showings and only change the status to “Pending” closer to the recordation date.
In 2017, the Honolulu Board of Realtors changed the terminology and agents now have to choose between “In Escrow – Showing” and “In Escrow – Not Showing”. With this new terminology, more agents select “In Escrow – Not Showing” earlier in the escrow process than agents would have selected “Pending” in the past, even though the new terminology is supposed to mean the exact same thing.
Also, the Honolulu Board of Realtors stops counting “days on market” when a property status is changed to “In Escrow – Showing” (previously stopped counting when a property status changed to “Pending”) which has caused a massive drop in days on market across many neighborhoods and cities when comparing year 2017 or later data to previous years (2016 or earlier).
Example: The median days to sell a fee simple single-family home in Honolulu was 22 days in year 2017 vs 71 days in year 2016, implying homes are selling at a rate more than 3 times faster in 2017 vs 2016, which most definitely is not the case!
Re-listing Properties: A property could be listed for sale in the MLS for hundreds of days, then taken off the market for a couple of weeks and re-listed, starting over with 0 days on market. Previous listing periods are not taken into account when calculating days on market for a property.
Leasehold: These are properties that have an expiry date, by which you typically no longer have rights to the property – learn more here. Probably about 5% of properties on Oahu are leasehold. Mixing leasehold and fee simple properties in calculating statistics – especially price values – is like comparing apples and oranges. It makes no sense!
Example: The median sales price for condos in Waikiki (leasehold + fee simple) was $390,000 year 2017. If we exclude leasehold properties from the calculation, the median sales price was $455,000 year 2017.
Note: Hawaii Living’s statistics exclude leasehold data from our calculations.
Sold Price to List Price Ratio: A neighborhood may show a sold price to list price ratio of 98% – for the sake of argument – which means properties in this neighborhood typically sell for 98% of the list price. This may be good to know, but analyzing recent comparable sales should probably carry more weight in one’s analysis in determining market value.
Median vs Average: Median more accurately depicts a central tendency to a sample size than an average. In other words, median is better at eliminating extreme outliers.
Example: Over a 1 year period, 3 condos sold within a building. Condo 1 sold for $1M, Condo 2 sold for $2M and Condo 3 sold for $10M, which means the median price for condos sold in this building is $2M and the average is $4.33M.
Note: Hawaii Living’s statistics are based on median figures.
Lack of Data: If only a few properties are sold within a neighborhood, the statistical conclusions may not be that relevant.
Example: Over a 1 year period, 3 homes sold within a neighborhood. House 1 sold for $1M, House 2 sold for $4M and House 3 sold for $4.2M, which means the median sales price is $4M in this neighborhood.
It is possible that most homes in this neighborhood are worth much less than $4M, but it just happened a couple of expensive homes sold around the same time. How many data points are needed to make something statistically significant? That’s a tough call. If you want to dig deeper and understand statistics on a higher level, check out this article on Measuring U’s website.
I hope this information has been helpful. Feel free to leave comments or questions below – thank you.