Quote:
Originally Posted by rd_aaron
This is a really weird stat to post. 29 years? That's like saying the S&P 500 grew at an average of 12.6% between Jan 1, 1979 and Dec 31, 2008. While true, if someone told you this in 2008, it's really not painting an accurate representation of the current market conditions (S&P 500 lost 37% from Jan 1, 2008 to Dec 31, 2008).
http://www.moneychimp.com/features/market_cagr.htm |
So I think I understand why he posted this. He is trying to show that the total sales is actually up compared to historical values, whereas if prices were about to take a downturn, total sales should be down (the more sales, the more it drives prices up).
But it is a horribly skewed stat, almost guaranteed to show a "positive real estate market" no matter the conditions for two reasons:
1. ooo edit -
my bad, he did take an average - didn't read, but I still think point 2 holds as the average will be yanked down by a previous total population
2. This value ignores population and inventory growth.
As the city grows, this number needs to go up in order to just maintain prices. A very rough correlation would say that was population increases, this number needs to increase by the same percentage to maintain prices. Since population has increased by a whole lot more then 6.73 % in the last 29 years, I would
argue that this stat actually shows quite the bearish market coming this summer.