When average just won't do!
We have a love/hate relationship with the word itself! Everyone loves to use average. Yet everyone loves to hate average. It is a term that we can use to justify where we are at and a term we can use to move on from where we are presently.
I don’t believe anyone is born with an internal desire to just be average. Don’t get me wrong, we can’t all be over-achievers, but somewhere in our lives we like to excel at something, maybe even just once.
Average is also a term that we can give our own definition to. For all of my life I have enjoyed participating in activities that are perhaps not considered normal by everybody, whether it be dog sledding, paragliding, mountaineering or racing cars. It has often meant that my family and I don’t get to large gatherings of people you might do at a hockey game or football match! Then, a few years ago I did my first half Ironman triathlon. Compared to all the stuff we had done in the past, this was a pretty big crowd of people and my wife commented finally we are doing something the average person does... later we had a chuckle at the statement because the frame of reference was our perspective.
The problem with average in real estate is it does not really reflect anything useful. You may hear that the average house price is $xxx or the average time to list is #xxx. Even in the real estate profession there is discussion about the best metrics to use when advising a client on the status of the market.
We have a category called “Recreational Real Estate” and I have written before about what a silly category it really is. It is not defined by the local board so much as the national association so we have to conform. The challenge is in defining what is recreational real estate?
Does recreational real estate include a weekend home on Lakeshore Drive valued at $3MM?. It certainly could. Does it include a leased cabin on a wilderness lake? Absolutely it could. Could it include a bi-ennial timeshare right to use? Yep, that too.
Using the above paragraph as an example, if we had one Lakeshore home sell for $3MM, two timeshare intervals sell for $4,000 each and a remote wilderness cabin sell for $75,000, what would the average sale be? Why of course, $770.750. Now how useful do you think that number is? Absolutely no use whatsoever, yet, over and over again the media is fed statistics that are close to meaningless without interpretation.
The role of your REALTOR® is to interpret statistics not feed them to you. When average (or mathematically, the mean) does not work very well, you may find reference to median. This crudely defines the centre of the bell curve on a graph. It basically drops the outlying anomalies. A little better perhaps, but without interpretation, pretty useless information again.
Next time you meet with your REALTOR® don’t be afraid to ask to look at the data you might surprised at how little average means at the end of the day!
The same problems can occur within any category of real estate not just the recreational category and the difficulties are compounded by the fact that the number of sales is reduced compared to four or five years ago.
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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.
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