Before I conclude the above statement, I must stress the situation that confounds real estate experts throughout the country: the problem with the analysis of real estate and the lack of understanding by consumers of the conclusions. Once I navigate through these topics, I can hopefully give you some information that will be not only meaningful but useful in your planning. The problems I stated above build on themselves and therefore the last one, lack of understanding, is a direct result of the first two. Unfortunately, neither will ever be corrected (at least not in the foreseeable future) and we are left to misinterpret the data in perpetuity.

Real estate, especially residential real estate, is a local phenomenon. It isn't national, regional, statewide, city or county related, but requires an almost block by block analysis. A great example of what I am talking about can be found at Lake Tahoe (Cal. & Nevada). There are significant differences in the following areas of the lake when it comes to value of the property: lake front, lake adjacent (near enough to use the amenities such as owning a dock on the lake), lake view and lake rights (ability to use the lake because of ownership of a house in the right area). Regardless of the size, architectural style and condition of the house, there are differences in demand for the four types of property which therefore translates into the price of the property. Reporting on the trend, at any time, at Lake Tahoe will have different meaning to the owners or prospective buyers of properties in each of the categories I have mentioned. It certainly would be more helpful to everyone if the sales of the houses at the Lake were reported by category instead of one real estate area.

If we just reported by neighborhoods and did not lump them together to make up a larger area, the reports of trends and prices would have more meaning. We don't do that and probably never will because it isn't cost effective to start doing that type of reporting.

Houses at Lake Tahoe can be permanent residences, second homes or rental properties, which, if broken down by utility, could be very useful to those seeking homes in a particular category.

Now that you see that areas or usage of the property are not broken down, it is easier to understand why statistics aren't as relevant in the real estate area as they could or should be. The stock market, another major segment of our economy, doesn't lump everything together and try to develop a trend as real estate does. The different investment vehicles are reported by category, Dow Jones 30 Industrial Average, The NASDAQ, The U.S. Treasury instruments and the mutual fund industry, to name a few types of investments. These are all compared separately and thus a trend that is accurate can be analyzed. What kind of trend could you get by analyzing the entire group as a single index? One that wouldn't be especially helpful. But that is what we have in real estate!

The analysis of the data continues. To arrive at a mean (average) price, all the sales of residential real estate in a given area are added together for the survey and divided by the total number of units sold and that is considered the mean price at that time. Continued...