Every month, financial media publish an array of housing statistics. What do all of those numbers represent, and what do they mean for you if you are buying or selling a home? Let’s make sense of them all.
A look at the terms
Let’s define some of the most important housing statistics you’ll often hear reported. Each of these metrics is presented with information that puts the numbers in context, such as the percentage of change compared to the previous month and the same period the prior year. These metrics also are often available on a national, regional and state basis.
Several private and governmental organizations report these housing statistics.
- Pending sales. Provided by the National Association of REALTORS® (NAR), this measures sales of existing homes that are under contract but not yet closed. This gives an idea of expected closings ahead.
- Existing home sales. Also provided by the NAR, this housing statistic reports on closings of existing single-family homes and condominiums. It breaks down prices and the amount of inventory available for sale. State and local REALTOR® associations provide these numbers as well.
- New home sales. This figure is based on sales contracts signed for a new construction home with breakdowns by price range.
- Housing starts. As the name indicates, this housing statistic is the monthly total of building permits issued and houses on which construction began. The U.S. Census Bureau publishes this housing statistic in cooperation with the Department of Housing and Urban Development.
- Construction spending. Provided by the U.S. Census Bureau, this figure measures spending for residential and commercial property under construction.
- Housing Market Index. Published by the National Association of Home Builders, this housing statistic reports the level of optimism among builders, who base their opinions on expected sales. It essentially tells what builders are forecasting in the days ahead.
- Median and average sales price. These are two types of statistics indicating the typical price at which existing homes are selling. The mean average housing price is calculated by dividing total sales in dollars by the number of homes sold for a given period. The median sales price is the figure exactly in the center of the complete range of sales prices. Ongoing sales price figures show whether prices are rising or falling.
- Sales-to-list-price ratio. What sellers ask for their home and what they actually get are often different. This ratio indicates the percentage spread between the two prices and is a measure of whether a market is stronger for sellers or buyers. A spread of 5 percent or less is considered a sellers’ market. A larger spread indicates buyers are more in control.
- Mortgage interest rates. Complex financial market factors affect mortgage interest rates. Among them is the federal funds rate (FFR), which is the rate banks charge one another for short-term loans between them. (Banks have legally required minimum deposit amounts. When a bank is about to fall below that reserve amount, it will borrow from other banks to get into compliance.) Mortgage rates float at a higher level than the FFR, somewhat like how a retail store charges a profitable amount on a product over what it paid for it.
The housing statistics that matter most
National, regional and even state numbers are not as valuable to you as what is happening in your local market. A particular region or state can have a generally strong economy with pockets of weakness and vice versa. When listing or shopping, research these local housing statistics. Best of all, consult a real estate professional for these and other measures of the health of your market.
Related – How to Hire the Right Listing Agent