WIDGET UPDATE: Since the pricing widget has now been up and running for exactly six months, we spent a little time yesterday looking at some data to try to see if it has any predictive ability. We came up with a list of twelve properties that had been both subjected to the widget treatment and…
WIDGET UPDATE: Since the pricing widget has now been up and running for exactly six months, we spent a little time yesterday looking at some data to try to see if it has any predictive ability. We came up with a list of twelve properties that had been both subjected to the widget treatment and gone on to sell. The findings were quite interesting: In every single case, the average predicted selling price fell short of the actual selling price. The interesting thing was the consistent range by which the widget underpriced. The widget price was between 9.4% and 19.8% under the ultimate selling price; on average the widget underpriced by about 14%. So we’re going to create a second-generation widget that shows average and median predictions as well as a predicted selling price based on the historical track record. Hopefully that’ll get done in the next couple of weeks. The twelve data points are listed below. P.S. If any reader would like to become the official keeper of the widget spreadsheet and try to keep an eye on this stuff, we’d be more than happy to hand it off!
Tyburg:
I agree with you that emotions can play a factor in determining the entire direction of a market (for example the collective drop after Lehman went under) but in terms of pricing a single property here on brownstoner, I do think looking at comps is the best way to determine a selling price.
“RE always goes up”
I don’t believe anyone here believed this. I think you like to SAY that people here believed this so you can attempt to sound smarter than everyone else.
It’s not working.
“Frankly, I don’t think it will be possible for the widget to ever accurately predict the sale price until the vast majority of its users are able to use it not to estimate their own valuation of the house in question but rather to estimate the value that someone else will place on the property. Kind of tricky.”
I agree that the widget is unlikely to ever produce an accurate guestimate of sale price. I think we are saying the same thing in different terms. I think the reason that the widget is consistently down is that people are invested in NOT looking at it objectively but through their own prism of desired price point (tybur’s point being that this kind of prediction can shift the market paradigm). Personally I try to guess what I think it will sell for based on my knowledge of the neighborhoods and I don’t make guesses on neighborhoods I know nothing about.
Mr B–is there any way of having the widget remind each individual user what they bid so we can go back and see how accurate we were individually?
Thanks, wasder. That’s what koolaid and rose-tinted Ray Ban’s do to this blog.
No spreading, just absorption. Depressing times ahead for all of us. MSM won’t let you know unless you do a little digging.
***Bid half off peak comps***
Antidope,
If you are really taking this on, I have another analysis to suggest. In addition to median price, there might be some interesting events in what happens at certain points away from the median. As the market for each house is in certain ways a unique market, the sale price should almost always exceed the median or average price. The question of study is whether it always does so within a certain degree or deviation off that median or mean.
Wasder, I don’t think it’s human nature to be invested in underbidding, but rather that it only takes that one buyer to beat the crowd by 10% to make it look like everyone else underbid. Frankly, I don’t think it will be possible for the widget to ever accurately predict the sale price until the vast majority of its users are able to use it not to estimate their own valuation of the house in question but rather to estimate the value that someone else will place on the property. Kind of tricky.
However, it will be possible to use the widget as generally establishing a confidence range as to what a signficant group of people might value the property. EVen if the mean or median is not a 100% accurate, this is still very useful. It can determine whether the ask is likely to be in the range of a large number of possible buyers (or a ta point at which rational people can negotiate toward or away from), or whether the buyer’s ask is more dependent on finding an unusual buyer who will value the property in a manner different from the crowd.
Sure, in the near term the “bulls” have some small vindication (setting aside the fact that they once thought “RE always goes up” and when it started to go down “BK is different.”) And I love that a widget on an anonymous blog is now considered “data.” Anyhow, the point isn’t whether prices deflated then stabilized without collapsing, as they did. The relevant questions are: Is the recession over, or is this only an inventory correction and a stimulus-induced pause? Is employment going to go back up? Is the financial sector going to bounce back fully, or only by half?
And this leads directly to: The question isn’t whether the widget underpriced. It’s whether someone can turn around and sell their place in a year, five years, ten years, whatever, without taking a loss. It’s a weak consolation to say, “But I beat the widget!”
And: Bulls are vindicated only when RE stops going down –so, has it hit bottom? I think it starts declining again, and noticeably, by the spring selling season.
BHO, look at the MOM numbers, the second derivative is clearly on a positive trend. Any idiot can see that.
11217 — read my comment above. You are right, the market is generally data drive, comps etc. BUT it can be mediated and modified. It’s not some machine that the buyer-side has no control over!
The only reason “comps” exist is because someone decided that X property is *worth* this much to *ME*
If the amount something is *worth* shifts, then who gives a crap about comps. The recent comps for X-type property are around $2 million… but interested buyers have taken a good hard look and maybe become a bit more rational and a particular house may only be worth $1.2 million — even though the comps suggest otherwise.
That’s how markets shift in a downward direction. Comps and seller-side appraisal is how a market shift upward — to the unsustainable lunacy that we find today.
“And for the crowd that believes prices will continue to go down, they are entering the number they think will represent the bottom of the market for a property.”
Now THIS is one of the truest statements I’ve seen around here in a long time!