The Edinburgh Realty eNewsletter
Issue #59 | February 2018Archive
Five top tips: Understanding real estate stats’ lingo
Median this, adjusted that, HPI, LVR… What do these terms actually mean? This month’s five top tips are five definitions, which will help you get the most out of the monthly real estate stats.
1. Median price: The average price can be significantly affected by one extremely high or low sale. Whereas, the median price involves listing houses in order of sale value and using the middle-point price. This more accurately reflects what the majority of houses sold for.
2. Seasonally adjusted: Seasonal adjustment accounts for long-term seasonal trends. For instance, there are always fewer house sales in December and January, and more sales in November and March. Depending on the timing of Easter, that can affect sale numbers over a March or April. Seasonally adjusting data highlights if any lift or fall in sales was in line with annual patterns – or if something else is going on.
3. House Price Index (HPI): The index monitors housing activity and trends over time, by analysing how prices are influenced by factors, such as land area, floor area, number of bedrooms, etc. It uses unconditional sales data (rather than settlement data, which is usually weeks later), to maximise accuracy and timeliness.
4. Loan to Value Ratio (LVR): LVR weights the amount of your loan against the value of your property. LVR = Loan Amount ÷ Property Value. E.g. If a property is worth $400,000 and you have a deposit of $100,000 (so need to loan $300,000), the LVR will be 75% ($300,000 ÷ 400,000 = 0.75).
5. Inventory: This indicates market turnover. It is a theoretical measure of how long it would take to sell current housing stocks. Expressed as weeks of stock available, it assumes current sale rates and no new properties coming onto the market. The fewer number of weeks’ inventory, the faster the market turnover. This means buyers are competing for a relatively limited number of properties. In a high inventory market, buyers have more choice and time to purchase.