Best Manhattan Beach Real Estate Statistics

I’m a Manhattan Beach Realtor®, and this is my confession: When it comes to measuring real estate market statistics, few in my profession know what they’re doing. I have degrees in Mathematics, Physics, and Finance; I’ve worked for years as an economic consultant, and yet I still find myself scratching my head trying to make sense of Manhattan Beach real estate statistics.

Have you ever noticed that real estate statistics seem to change depending on whose reporting them, and what their incentives might be? I’ll be the first to admit how tough it is to figure out the best way to calculate good stats. Do you use average or median home prices? And should we calculate those on the nominal sale prices, or should we look at prices per square foot to normalize for differences in dwelling sizes?

The story gets even tougher for Manhattan Beach real estate statistics. Our market rarely has more than 40 to 50 homes sold in any given month, and what does sell can vary wildly depending on the part of town, the neighborhood, whether the property is the original 1950′s structure, or a modern rebuild. Few properties in Manhattan Beach are cookie cutter track homes like you might find in other areas of the South Bay.

Let’s start from the beginning…

Median Home Prices are Better Than Average Prices

The first thing you should know about real estate stats is that calculating the median home price tells much more about your market than the average price. Here’s a good wiki page on real estate pricing if you want more detail, but the basics are that unless you have a large homogeneous data set you’re going to have some homes way above average (luxury), and some way below (distressed homes); an average calculation will give undue weighting to data points farther from the central tendency.

A median price calculation considers each home as a single ranked data point, regardless of its distance from the central tendency. Check out this wiki page if you want a refresher on calculating a median price.

Moving Averages Are Better Than Monthly Statistics

One way statisticians reduce short term fluctuations is by using moving averages. By combining several periods worth of data into a single calculation, we’re able to analyze changes over time without as much near term variability.

Just looking at the following median home price chart illustrates our dilemma:

Calculated on a monthly basis, Manhattan Beach real estate statistics look like noise. In fact, the standard deviation of monthly changes is about 20% for the nominal home price, and 12% for price per square foot.

Combining a few months worth of data together and then calculating the median starts to smooth out the curve:

The standard deviation between periods drops to 8.5% for the nominal prices, and 5.7% for the price per square foot. That’s a huge difference compared to the regular monthly prices!

The story gets even better when we calculate the 6-month moving average:

The 6-Month moving average drops standard deviation to under 4% for nominal prices, and only 2.1% for price per square foot. Here’s a summary of the variability stats:

Pay Attention To Price Per Square Foot

Finally, we have to consider that two homes right next to each other often vary in price simply because they vary in size. The best way to normalize for this is to divide the sales price by the square feet of the structure, which yields the infamous price per square foot.

Referencing the variability stats above shows a clear example of how price per square foot significantly reduces fluctuations. In the cases above, the price per square foot calculations demonstrated about 40% less short term fluctuation than the nominal home prices.

Putting It All Together

For all you Manhattan Beach home buyers, real estate agents, or brokers, just follow this simple recipe for interpreting sales data:

1. Use the median home price, not the average
2. Look for trends by analyzing the 6-month moving median
3. Pay attention to prices per square foot, not just nominal home values

To browse through what’s currently on the market, check out these Manhattan Beach home listings, or check out what we have available now with NW’s real estate listings. Contact a Manhattan Beach Realtorwith questions about any listing.