When It Comes to Real Estate Statistics, We Should Think “Median,” not “Average”

By JIM SMITH, Realtor®

Excuse me for getting a little nerdy here, but it’s important to know the difference between “median” and “average” when studying the real estate market, and here’s why.

Let’s say an area has five home sales: one at $300,000, a second at $325,000, a third at $330,000, a fourth at $400,000 and a fifth at $1.2 million.  The average sale price would be $511,000, a huge increase over the previous year when all the sales were under $400,000. The median sale price would be $330,000, because half the sales were under that price and half were over.

Now let’s look at “Days on Market.” Let’s say those five homes took 1, 2, 5, 7, and 150 days to go under contract. The average days on market would have been 33, while the median would have been only 5 days. Which is more useful?

These two hypothetical scenarios are precisely what we’re seeing in the real estate market. Luxury homes are selling much more quickly than they have in years past,  inflating the average sales price, whereas the median sales price by definition discards both the lowest and highest data points, providing a more accurate picture of what’s happening in the market.

Average_vs_median_DOM    At right is a chart comparing 2017 average days on market to median days on market.   Homes that take a long time to sell — particularly in the current market — are almost invariably overpriced.  The amount of time these homes languish on the market artificially increases the average days on market.  The median days on market is a much better reflection of the market.

Despite this, we continue to hear statisticians and market analysts tell us the changes in the average sale price or the average days on market instead of giving us the more meaningful median statistics.

It’s Thanksgiving, and I’m Thankful for Many Things and Many People

Real_Estate_Today_bylineThanksgiving is my favorite holiday – a non-denominational opportunity to reflect on the past year and our current situation.

I subscribe to the teaching that what we dwell on affects what we draw to ourselves. For example, if we think we might fail at a task, we are more likely to fail, but if we think we’ll succeed, we’re more likely to succeed. Some people refer to this as the “law of attraction.”

That’s why I like Thanksgiving, because it causes me to dwell on what I’m thankful for – not my regrets, not my failures, not what went wrong, but what went right and the good people in my life.

Well, I have a lot to be thankful for!

First of all, I’m thankful to be married to Rita, who always thinks positively and now shares her positive energy with me and the broker associates at Golden Real Estate as our office manager.  Her positive orientation is evident in our house, where she has such phrases as “How Does It Get Any Better Than This?” and “What Else is Possible?” printed on our family room wall.  How did I get so lucky as to attract this woman into my life?  I’m forever grateful for that!

Rita and I have no children together, but we have three “adopted daughters” — three women who consider us “Mama Ri” and “Papa Jim.”  Thank you, Kristin in Kansas City, Ashley in Centennial, and Benedikte in Seattle, for honoring us with your love.

Secondly, I’m thankful for our great broker associates at Golden Real Estate.  In order of seniority, they are:

JimSwansonJim Swanson, who worked beside me at Coldwell Banker and RE/Max Alliance before joining Golden Real Estate when Rita and I founded it in 2007.  He’s our native Goldenite, living ½ mile from our office.

 

web_smallCarrie Lovingier lived in Golden when she joined us as Carrie Ackley soon after our founding. She married a high school sweetheart, Brady, and lives with him and his sons in Evergreen now – she’s our foothills anchor.

 

Cropped 2016 pictureKristi Brunel is from Wisconsin but met her soul mate, Kenny, on the ski slopes of Colorado, marrying into that legendary “old Golden” family. Kristi and I met through Leadership Golden, and I was honored that she wanted to begin her real estate career with us.  As an owner, along with Kenny and her father-in-law, of numerous rentals, she’s a resource to me and her clients as an expert in buying investment properties.

Leo Swoyer came to us as a new Realtor after a long career as a licensed Leo_Face_Shot_with_Glasses_-_04-17-2016_1668_1_25appraiser specializing in mountain properties. His expertise in valuing properties and his knowledge of mountain properties has benefited us on many occasions.

 

photoChuck Brown was an independent broker with Metro Brokers in Denver, but he lives on Lookout Mountain, so he was attracted to joining Golden Real Estate as a broker associate. He is our Denver specialist and continues to list many Denver homes and serve Denver buyers as well as here in Jeffco.

David's head shots 003David Dlugasch was broker/owner of his own real estate company in Crested Butte, but chose to join Golden Real Estate when he moved to Arvada to be closer to his daughter’s family in the Village of Five Parks. He says that reading my newspaper columns was a factor is deciding to join us. Thanks for the compliment, David!

Susan DixonI met Susan Dixon at the Colorado Environment Film Festival. Her commitment to sustainability drew her to leave her previous brokerage and join Golden Real Estate. She lives in Arvada.

 

Andrew LeskoAndrew Lesko transferred to Golden Real Estate so he could specialize in Golden area condos and townhomes. We were so impressed by his research on this topic and his creation of www.GoldenTownhomes.com that it was a no-brainer to welcome him into our fold!

 

NormKowitzNorm Kowitz serves with Kristi Brunel on the board of directors of the Christian Action Guild, and I met him when he represented a buyer for one of my listings. He, too, was attracted by this newspaper column and before long he became a great copy editor for me. Thanks, Norm, for joining us!

 

These broker associates provide a depth and breadth of expertise, but they all share a commitment to our values of integrity, service and sustainability, and I couldn’t be prouder to be associated with them.

Next, I am thankful for you, our readers, who turn to us every week for advice, which we are happy to provide, whether or not you hire us for the sale and/or purchase of real estate.  Thank you for your confidence in us.

Realtor pinNext, I’m thankful for the National Association of Realtors and our local association, the Denver Metro Association of Realtors. Not all licensed agents choose to join NAR and DMAR, but they all benefit from these organizations’ work to protect home ownership and our industry. I’m proud to say that Golden Real Estate is a Realtor brokerage, and all our agents are Realtors.

I’m also thankful for our local MLS and its CEO, Kirby Slunaker, who has shepherded the organization to a level of service and effectiveness which I couldn’t have imagined just five years ago. Our MLS has a great website, and now we are about to merge with the northern Colorado MLS, called IRES, to create an even stronger and better MLS. I’m proud to serve on the Rules & Regulations Committee of REcolorado.

Regular readers know of my commitment not just to sustainability but also to the adoption of electric vehicles.  I am so thankful that EVs are going mainstream and that multiple countries (France, China, Norway and the UK, among others) are speeding the end of internal combustion-powered automobiles. I predicted this revolution a couple years ago, but this year’s developments in that regard surprised even me.

Rotary Club of Golden LogoWe should all be thankful for the various service organizations which contribute so much to society— Rotary, Lions, Sertoma, Optimists, Kiwanis, and others. Rotary, for example, is singularly responsible for the eradication of polio. The Lions Clubs, inspired in 1925 by Helen Keller, have worked on projects to prevent blindness, restore eyesight and improve eye care for millions of people worldwide. The Optimists are all about serving youth. Here in Golden, they have a “bicycle recycle” program that has provided free or inexpensive bicycles to those who couldn’t afford them. Sertoma (short for “Service to Mankind”) is devoted to serving those at risk of hearing loss.

logo100Service clubs in America are in decline, although I’m pleased to report that both the Golden Rotary Club and Golden Lions Club are experiencing a surge in membership this year. (Rita and I are Rotarians, and I’m a Lion.) If voluntarism is in your heart, I urge you to check into one of these clubs in your community, all of which welcome you as their guest at one of their meetings.

I don’t have room to mention all of the organizations or people for whom I am thankful, but let me mention one more — our local chambers of commerce. Golden Real Estate is pleased to be a member of the West Chamber serving Jefferson County and the Golden Chamber of Commerce, on whose board of chamberlogodirectors I serve. These organizations play an important role is promoting a healthy business environment in the communities they serve. Legislators benefit from their advice and feedback regarding bills affecting business. All businesses should consider joining their local chamber and participate in their events.

8WWLogo copyLastly, on a personal note, Rita and I are eternally thankful to have connected with Body in Balance Wellness Center, where our health and fitness benefited from their “8 Weeks to Wellness” program — a real life changer!

As We Learn How Fragile the Electric Grid Is, ‘Off-Grid’ Gains Increased Appeal

Real_Estate_Today_bylineNews from our hurricane-ravaged states and from the Caribbean islands can be unsettling, even to those whose life and property weren’t affected by these events. How would life be for you if you lost electricity for several weeks, or even months?

Without electricity, there is no refrigeration, and you can’t even run a gas furnace to keep warm. If you live on well water, you couldn’t run the electric well pump, so without a manual pump (which are still available) you’d be without water. Forget the internet and charging your cell phone. Gas stations wouldn’t be able to pump gas, so you’d soon lose the use of your car or at, best, find long gas lines — unless you have an electric car powered by off-grid electricity.

Even before the devastating news from Puerto Rico, I’d been considering going off-grid in my Golden home, or at least buying a Tesla Powerwall battery pack as back-up to the electricity supplied by Xcel Energy. I have enough solar panels to power my home and my cars, but when the grid goes down, my solar panels are useless. With today’s solar power systems, you’re either on-grid or off-grid. I used to like to say that the grid is my battery. Now I’m not so confident of that.  My home sends power to Xcel during the day then receives if from Xcel at night.  As long as this  give-and-take arrangement (called “net metering”) works as designed, it makes no sense to own your own battery.   But what about when it doesn’t work?

A friend and mentor of mine, Steve Stevens, has a home powered by Xcel, but also keeps a fully-charged battery pack in his garage so when there’s a black-out he can throw a switch and run his home (and charge his cars) directly from the battery pack.  His solar photovoltaic (PV) system will continue charging the battery pack during daylight hours, which is capable of providing enough electricity to live normally during the night.

I used to think such an investment was silly, but so, it could be argued, is flood insurance — that is, until you have a flood. I’m not considering flood insurance, but I am seriously considering buying “electricity insurance” in the form of a battery back-up system for my home and possibly for my real estate office.

Even a one-day power outage could spoil food in the refrigerator and freezer. Perhaps you’ve had that experience. Such a system would help to mitigate that risk.

Maybe you read, as I did, that Tesla has suspended the production of its new Tesla Semi so it can concentrate on making Powerwall units for Puerto Rico and other areas devastated by hurricanes. Presumably, Tesla is also sending the solar panels necessary to charge those battery packs.

It’s also possible to get off the natural gas grid and heat your home with electricity.   If you’re skeptical, it’s probably because when you think of electric heat, electric baseboard or “resistance heating” comes to mind.

Resistance heating involves the use of electric coils which get hot when connected to electricity. You’ll find this same level of technology in the toaster sitting on your kitchen counter – an appliance invented in 1893.  Modern electric heating, on the other hand, is accomplished by way of a heat pump.  These devices use an electric compressor to extract heat from inside your house when it’s hot (we call that “air conditioning”) and extract heat from outdoors, even when it’s below freezing, to heat your home in the winter.

This kind of heat pump is called an “air source” heat pump because it extracts heat from the outdoor air. A more expensive but more efficient heat pump extracts heat from the earth, which is a constant 55 degrees once you reach six feet below the surface in our latitude.  It takes less electricity to extract heat from that 55-degree source than it does from the air, because the air can get much colder. Unfortunately, the cost of installing the vertical or horizontal wells required for a ground-source heat pump makes these systems much more expensive to install, though cheaper to operate.

mini-split_12,000_BTU_Klimaire_16_SEER_$645Recently I wrote about “mini-splits,” which are air source heat pumps common throughout Europe and Asia but which are just beginning to make their appearance in America. They will ultimately make our gas forced air furnaces and A/C units obsolete. They haven’t been popular here because, without using ducts, you’d require one for each room. At right is a 12,000 BTU kit that I found online for only $645. There are systems currently available that include up to four interior wall units (at the top in the image) that run off a single compressor (bottom left in the image) for under $2,000. They both heat and cool, eliminating the need for a gas furnace plus separate A/C compressor and chiller unit.

Rheem heat pump water heaterDomestic hot water can also be heated electrically using a heat pump water heater. Home Depot sells a 50-gallon Rheem model (left) for $1,199 and claims “$4,000 in energy cost savings.” It’s important to put this model in unconditioned space — or in a room with outdoor air available. The reason is that the heat pump is transferring the heat from the room into the water, so it functions like an air conditioner for the room in which it is installed. If it’s in a small room, that room can get very cold as your water gets hot! If your current furnace room has “combustion air” ducts supplying outdoor air to your gas furnace and hot water heater, those same ducts can provide the needed outdoor air when you convert to heat pumps. Just be sure to keep the door to this room closed — and not have louvered doors.

If you can also do without gas for cooking — and there are some great electric cooktops available now — you can get rid of your gas meter (saving the monthly grid connection fee) and live only off the sun.

When Buying or Selling a Pre-1978 Home, Lead-Based Paint Is a Big Deal

Real_Estate_Today_bylineYou might think that nearly 40 years after lead-based paint was outlawed that it would no longer be an issue, but you’d be wrong.

Over the past decade I have witnessed an increased rather than decreased attention to this issue.  Just read Section 10.10 of the current state-mandated Contract to Buy and Sell Real Estate (emphasis added):

“Unless exempt, if the improvements on the Property include one or more residential dwellings for which a building permit was issued prior to January 1, 1978, this Contract is void un

less (1) a completed Lead-Based Paint Disclosure (Sales) form is signed by Seller, the required real estate licensees and Buyer, and (2) Seller receives the completed and fully executed form prior to the time when this Contract is signed by all parties.”

It’s not uncommon for this requirement to be fudged by the parties and their agents, but doing so can create serious problems.

In order for this rule to be followed, it is critical that the listing agent make available to prospective buyers a lead-based paint disclosure, signed by the seller, prior to them submitting their offer. This can be done by making it a “supplement” to the MLS listin

g. The buyer’s agent must then have their buyer sign that form — and sign it themselves — and submit it with their offer.

Notice that the deadline for all parties signing is not upon submission of the contract, but upon the contract being accepted (signed) by the seller. Therefore, the listing agent should take care to see that all parties have signed the Lead-Based Paint Disclosure before allowing the seller to go under contract with a buyer.

Not only can the violation of this rule subject the buyer, seller and both agents to a fine of $16,000, it also creates an opportunity for a seller to get out of a buyer’s contract, which is otherwise very difficult for sellers to do.

Imagine, for example, a scenario in which a seller who is already under contract to sell his home receives a much better back-up offer. If it can be shown that the current contract was fully executed before the Lead-Based Paint Disclosure was signed by both parties and their agents, it is conceivable that the listing agent could cite Sec. 10.10 of the contract and declare the contract void for that reason alone, allowing the seller to accept the better offer.

The buyer would have no recourse, because, for starters, he would be admitting that the disclosure had not been signed on time, resulting in that $16,000 fine.

What Should and Shouldn’t You Fix When Preparing to Sell Your Home?

Real_Estate_Today_bylineWhen I’m interviewed by prospective clients about listing and selling their home, one of the most common questions they ask me is whether they should make a certain improvement or repair or replace a particular fixture or appliance.

This week I’d like to share with you my response to such questions.

Periodically, the National Association of Realtors does a “cost vs. value” analysis which determines the return on investment (“ROI”) for different renovations or improvements that a homeowner might make. Consistently, the ROI is under 100%.

If you’re not going to increase what you get for your home by at least what you spend on an improvement, why do it? 

 Homeowners will often make expensive improvements when they want to sell their home. My advice is to make only those improvements that you would enjoy yourself, and make them sooner, rather than later so you have an opportunity to enjoy them. Of course, you’ll want to make these improvements with an eye toward whether a future buyer might like them, but make them to enjoy yourself since, when the time comes to sell, almost no improvement you have made will return more dollars than you spent on it.

My advice to homeowners who have reached the point of selling is to concentrate on eliminating negatives instead of making improvements. Look for the things in your house which are bound to create a negative impression on a buyer.  I call them “eyesores.”

For example, replace worn carpet, especially older shag carpets. If the carpet is okay but rippled, have the carpet stretched. Refinish hardwood floors that show obvious wear. Repair and repaint damaged walls.

Replace your kitchen counters only if they would draw a negative comment in a visitor’s eye, but not just because they aren’t updated. Formica countertops of a neutral color that are in good condition may be outdated, but they rarely diminish a buyer’s interest in your home.

Does your bathroom have those 1970’s (or earlier) fixtures with matching pastel colors? Replacing them will probably not give you a return on your investment.

Of course, these are generalizations, and you really should have a set of “fresh eyes” to give you advice on your floors, walls, kitchen and bathrooms. We have 10 broker associates at Golden Real Estate and often I will bring one of them with me on the first meeting with a prospective client. Two of my broker associates are staging consultants and one even has a degree in interior design, so they can provide valuable insight.

What if one of the issues is something that is not obvious but will become an inspection issue, such as an extremely old furnace or aluminum wiring that hasn’t been mitigated?

These hidden defects need to be disclosed but it’s not typically necessary to address them in advance. Instead, save them for possible use as negotiating points when responding to inspection demands.

Let’s say that your buyer submits an inspection objection asking you to replace the 20-year-old furnace (which is working okay but beyond its useful lifespan) and to “pig-tail” your aluminum wiring. If you haven’t mitigated the aluminum wiring before listing, you can respond to the buyer’s demands by saying, “I’ll fix the aluminum wiring, but I won’t replace the furnace,” and the buyer will probably be happy.  But if you had mitigated the aluminum wiring before listing, you can’t play that card and may have to replace your furnace to keep the buyer from terminating.

Keep in mind that an old furnace and aluminum wiring are not visible to buyers the way a worn hardwood floor or rippled carpet are, and replacing the furnace or mitigating the aluminum wiring before listing will not bring you more offers, and not doing so won’t reduce the number of offers you receive.

Sellers also ask me if they should buy a transferable home warranty before listing because of their older appliances. Again, I urge sellers to save that move as an effective response to an inspection objection requesting replacement of those appliances.

If you’re wondering what you should or shouldn’t do before selling, invite us to meet with you in your home.

 

Seller’s Market Shows Continued Strength — How Long Will It Last?

The charts below show the continued strength of Jefferson County’s and Denver’s residential real estate market. The number of sold listings keeps rising despite a decline in active listings. The median sold price has doubled in just 5 years from about $200,000 to $400,000, and the average home now sells for about 100% of its listing price.

The decline in active listings is not due to a lack of new listings. The problem — if you want to call it that — is that new listings go under contract so quickly. Median days on market has been under 10 most of this year. As I’m writing this on Monday, there are 1,228 active Jeffco listings, but another 1,299 listings are under contract.  In Denver, there are 1,837 active Denver listings, but another 1,605 listings are under contract. Call me for statistics on your section of Jefferson County or Denver.

Jefferson County statistics:Jeffco_market_charts

Denver statistics:Denver_market_charts

When I Became a Realtor 15 Years Ago, I Didn’t Know What I Didn’t Know

Real_Estate_Today_bylineAs a new Realtor in 2002, I thought experience wasn’t all that important. I had taken the required courses and passed the state licensing exam on my first attempt, and I benefited from the terrific “Fast Start” training at Coldwell Banker.  How complicated could it be, I figured, to help a client buy or sell their home?

Obviously, I didn’t know what I didn’t know, and, of course, that will always be the case. But it’s clear to me that I do know a lot more now than I knew in 2002!

I still learn from every transaction, and that’s the key.  The more transactions that an agent does, the more he or she learns. That’s why we have office meetings every Monday, so that we can keep learning and share what we learn with our fellow agents.

Golden Real Estate agents participated in 104 closings over the last 24 months.  With nine active agents during that time period, that comes to an average of 11.5 closings per agent, which translates into experience you don’t get from all agents.

I advise buyers and sellers to consider how many transactions an agent has completed rather than how many years they’ve been in business. That information is available at www.FindDenverRealtors.com.

When you decide to hire a broker you can’t know what that broker doesn’t know – and that could be a lot.  Still, you’ve made a wise decision because it’s a virtual lock that they know more than you do and can more effectively navigate the often tricky waters of real estate transactions than your neighbor who insisted on trying “for sale by owner.”

All brokers are required to take 36 hours of continuing education (CE) classes every three years, and I have taken more than required. However, I think of this newspaper column as my “personal continuing education classroom.” That’s because nearly every column I write requires me to research a particular aspect of real estate. Regardless of the topic, I need to learn more before I can write about it. My practice is to send a draft of each column to one or more known experts on that topic, as well as to my broker associates, for feedback before going to press.

As a result, I can’t recall embarrassing myself by publishing a column that was factually incorrect.

Continuing education is important, and you’ll find many agents who have certifications indicating they’ve completed additional training on one or more real estate specialties. Some popular certifications I look for in other agents when referring business to them include: ABR (Accredited Buyer’s Representative), CRS (Certified Residential Specialist), GRI (Graduate Realtor Institute) and SRES (Seniors Real Estate Specialist).  These certifications point to extra training which sets them apart from agents without those certifications. Having these certifications is particularly useful when the agent does not have a high number of transactions under his or her belt.

EcoBroker is another certification that most of the agents at Golden Real Estate have (and that the newer ones are pursuing), indicating special training in energy efficiency, sustainability and solar power, which we feel is so important nowadays, both to save money for the homeowner and to combat the effects of climate change.

Because a home purchase is typically the biggest one most of us ever make, it’s critical that you arm yourself with as much useful information as you can. When you sell your home, you want to make sure that you reap all the gains you deserve.

Toward that end, Golden Real Estate is holding another of its popular workshops, next Tuesday, September 5, from 5:30 to 6:30 p.m. in our South Golden Road office.  I’ll be the primary speaker and I’ll answer your questions pertaining to both buying and selling real estate. The fee is $10, and includes hors d’oeuvres and other refreshments. It also entitles you to a one-hour personal consultation at a later date with myself and/or another Golden Real Estate agent you might meet at the workshop.  It’s important that you register in advance. You may do that by calling me at 303-525-1851 or by sending an email to me at Jim@GoldenRealEstate.com. My promise to you is that you will leave empowered to get the best deal for yourself, whether buying or selling.