Hey everyone and welcome back for another deep dive. We’re going to dig into something that gets tossed around a lot in real estate and that’s the median house price. We really want to unpack that for you today, what it actually means and uh why it matters, but also and this is super key. Why it’s just one piece of a much bigger puzzle when you’re making those, you know, serious real estate decisions.
Yeah. Yeah. No, I totally agree. It’s a bit like, you know, getting all excited about a flashy sports car just because of its speed. And I mean, sure, speed is important, but what about handling? What about safety, fuel efficiency? You know, there’s a lot more to think about beyond that one single number that, you know, grabs your attention.
Oh, I like that analogy. Okay, so before we get into all those other factors, let’s make sure we’re all on the same page here. Yeah.
What is the median house price exactly? You know, what makes it different from just like the average price?
Imagine like a bunch of houses, right? All lined up from the cheapest to the priciest. The median price is the one that is sitting right there in the middle. It’s not pulled around by those super expensive places that can really throw off the average.
So, like if some big- time celebrity swoops in and buys a $10 million mansion in a neighbourhood where everything else is usually going for like $500,000, the median wouldn’t be drastically affected.
Exactly. You got it. The median helps us kind of like see past those outliers and get a more, you know, a more realistic view of what a typical home actually goes for in that area.
Okay, that makes sense. That makes sense. But you know even when we are just looking at the median it’s still so important to you know what they say compare apples to apples. What does that mean practically speaking?
It means understanding that you can’t really compare the median price in let’s say one neighbourhood from last month to the median in a totally different neighbourhood from like 6 months ago. The location, the type of property, even just the time frame, they all matter when you’re comparing these numbers.
So if I’m seeing the median price in my neighbourhood going up,
it doesn’t necessarily mean that my little bungalow just doubled in value.
You got it. That’s actually a really common misconception. That median price, it just reflects what houses have sold for recently in the area, not necessarily what your specific house is worth at any given moment. You could have a few really pricey homes selling, which pulls that median up, while your property’s value might be doing its own thing. You know, staying put or growing at a different rate.
That’s really important to keep in mind. It’s easy to get, I don’t know, wrapped up in those headlines. about rising prices, you know, oh, the market’s booming.
Yeah.
But it’s not always the full picture, is it?
Now, um I’m curious about something else. There is this idea that you might actually see slightly different medium prices from different sources. Like, why is that? Why would that be?
Well, because different sources might use different data, you know, different sets of information, different time frames for their calculations. One might be working with daily sales data. Another one might be looking at monthly or even quarterly figures.
So, it’s like when you check the temperature on different thermometers, you might see a slightly different reading on each one, but you’re still measuring the same basic thing, right? The temperature.
Exactly. The key is consistency. Pick a data source you trust and stick with it over time. You’ll get a much more accurate view of the trends.
That makes a lot of sense. Yeah, consistency is key for sure.
Yeah.
Now, we shouldn’t be making decisions solely based on the median house price. It’s just one single piece of a much bigger puzzle, right? So, What are some of those other puzzle pieces we need to be thinking about?
Well, one that comes up all the time is days on market. DOM.
Yeah, Dom. That one seems, you know, pretty straightforward. Basically, it’s how long a property sits on the market before someone snatches it up.
Exactly. And you know what? It can tell you a lot about what the market is really doing. If it’s a hot market, those houses, they’re gone. Just like that, you see a very low dom.
But if homes are just sitting there for weeks on end, maybe even months, that could be a sign that uh that the market is maybe not so hot anymore.
You got it. And that’s just one example. There’s also vacancy rate, capital growth, household income.
Okay. Okay. Hold on a sec. That seems like a lot to wrap our heads around. Before we go down all those rabbit holes, let’s take a step back for a sec.
For someone who’s maybe just starting to learn about real estate, why does it even matter to look beyond just the median house price? Like, what’s the risk of getting fixated on that one number?
Oh, that’s a great question. You know, It’s really tempting to just keep it simple, right? To just look at that number and go, “Okay, prices are up. Everything’s good.” But that’s how people can end up making uh well, some pretty costly mistakes.
It’s like judging a book by its cover. You see a cool title, maybe a flashy cover, and you think, “Oh, this is going to be amazing.” But then you actually crack it open and layer,
right? And it’s like the plot is totally predictable, characters are boring, or maybe the writing’s just not that good.
And in the world of real estate, that could mean like overpaying for a place or totally misjudging, you know, where the market’s actually heading. You could end up making an investment that like in 5 years, 10 years just doesn’t make sense for you anymore.
Exactly. It’s like thinking a basketball team is definitely going to win just because their star player gets 30 points a game. Maybe their defense is terrible. Maybe they have a lousy coach. Real estate, it’s kind of a team sport, too. There’s a lot to consider.
Oh, cool. Love that. Love that analogy. So, let’s say I’m ready to put on my like, you know, my real estate scout hat. I want to really evaluate the whole team. You talked about um days on market, the dom and vacancy rate earlier. What can those really tell us? What kind of insights do we get from those?
All right. So, let’s say you’re checking out a neighbourhood and the median house price has been climbing steadily, right? Looks great on paper, but then you dig a little deeper and you see that the DOM has also been increasing. Maybe homes that used to sell in like a week are now sitting on the market for 2 months, 60 days, 90 days.
Yeah. That would definitely send up a red flag for me. That’s a sign that maybe the demand isn’t as strong as that rising median price, you know, initially had me thinking.
Totally. And then you start poking around about the vacancy rate and what do you find? It’s through the roof. A ton of rental properties are just sitting there empty. And that is a big warning sign for investors,
especially the ones who are really depending on that rental income to, you know, pay their mortgage or, you know, actually make some money from that investment.
Exactly. So even though the median price might look all shiny and exciting at first, you look closer. Those other factors are telling a different story, a more complicated story.
It’s like one of those optical illusions, right? You think you’re seeing one thing, but then you actually like focus and you’re like, whoa, wait, there’s a whole other picture here.
That’s a great way to put it. And that’s why we can’t just stop at one or two things. We got to look at capital growth. We got to think about household income.
Okay, capital growth. Let’s talk about that. Isn’t that like the holy grail of real estate,
right? that magical increase in your property value over time. Okay, everyone wants that.
Oh, for sure. It’s huge for building long-term wealth. But here’s something that’s really interesting. Even what seems like a tiny difference in annual capital growth can become a massive difference over time.
Okay? Like what? Give me an example.
Let’s say we have two properties. Both of them were bought for $500,000. One has an average annual capital growth rate of 3%. The other one grows at 4%. Just 1% difference. After 10 years, that little 1% difference means one property is worth $78,000 more.
Whoa. Okay. Yeah, that is a big difference. Yeah, that makes me want to pay attention to that capital growth potential.
You should. That’s why you’ve got to look beyond just the median price. You want to put your money in places where, you know, capital growth has been strong and where you have good reason to believe it’s going to keep going. A strong local economy, growing demand, you know, all of that.
So then, how does household income fit into all of this? How is that relevant?
Household income, it basically gives us a peek into the financial health of a neighbourhood. Areas where people are earning more money, well, they tend to have, you know, more disposable income, which can lead to, you know, more demand for housing. And when demand is high, well, that can push prices up,
right? If people have more money to spend, they’re more likely to want to invest it in, well, in their homes, right?
Exactly. But it’s not just about how much people are making. It’s also about how many properties are even available. We’ve got to keep an eye on stock on the market. Basically, how much inventory is out there,
right? Because a low supply, if there aren’t that many homes for sale, that usually means less competition. Less competition for the buyers, which means the prices are probably going to go up.
Basic supply and demand. But then, let’s flip it. What if you see a ton of properties hitting the market all at once? Well, that could be a sign that things are cooling off a bit. Maybe prices are about to drop.
It’s like anything, right? Too much of it and it’s not as valuable anymore. Okay, so we’ve done days on market, vacancy rate, capital growth, household income, and stock on market. What about rental listings? How does that factor in?
Rental listings, they give you a feel for the temperature of the rental market, right?
If you’re thinking about buying a place as an investment, this is key. If there are a ton of rental listings, it might mean that the demand from renters isn’t that high, which could mean lower rental income for landlords,right? Because every landlord is competing for a small pool of renters, They’re going to have to lower the rent they’re asking to attract someone.
Exactly. And then last but not least, we’ve got the owner versus renter ratio. This one gives you a gut check on the neighbourhood vibes.
Oh, yeah. I’ve definitely heard that if you have a lot of owner occupiers, that’s usually a good sign, a good thing.
It can be. Yeah. If you have a high percentage of owner occupiers, it often means that you have a more, how do you say, a more stable community, right? People are putting down roots. They care about where they live.
They’re less likely to just pick up and lease. The market takes a little dip, right? Which in the long run probably makes for more steady, stable growth.
Exactly. Now, don’t get me wrong. A higher renter ratio doesn’t mean that a neighbourhood is bad or anything. It just might mean that you have more people coming and going, more transient, which can affect things like property upkeep and how much value the homes gain over the long term.
Wow. This is fascinating stuff. It’s crazy how all of this works together, you know, to give us a much clearer picture than just looking at the median price by itself.
Oh, I know. Like you said before, we’re kind of like real estate detectives here. Got to gather all the clues. clues before you can, you know, crack the case.
And speaking of clues, there are a few more for us, especially about looking at the big picture, you know, thinking long term.
Okay, so we’ve really covered a lot of ground here, haven’t we? I mean, from days on market to vacancy rates to like, you know, the whole owner occupier thing. We’ve gone way past just looking at that one number. Yeah. That median house price.
Yeah. Yeah, we have. And that’s really the whole point. It’s kind of like thinking about if We were trying to figure out who’s going to win an election, right? You wouldn’t just look at one poll.
No way. Yeah.
You’d want to see what all the different polls are saying. You know, look at the candidates, see what they’ve done before, what their track record is, what’s the political climate like. I mean, you’d want the whole picture.
Exactly. And real estate, it’s no different. The more information you have, the more, you know, the more data points you’ve got, the clearer everything becomes. You can actually start making smart decisions.
And one thing to really emphasize is how important it is to like to take the long view, you know, when it comes to real estate. Why is that? Why is that so crucial?
Well, real estate, it’s cyclical, right? What goes up must come down or it levels off for a bit. It’s up and down all over the place. If you’re just looking at this exact moment in time, you’re missing the bigger picture, the bigger trends.
So, it’s like you’re on a roller coaster and you’re freaking out about every little turn and bump instead of just enjoying the ride.
Exactly. It’s easy to get caught up in the moment, right? Market’s hot, everyone’s excited, then boom, things cool off, everyone panics, but you know, the really experienced investors, they know real estate is a long game.
They’re playing chess, not checkers.
Exactly. They’re not looking for the quick buck. They’re looking for that steady, reliable growth over time. That’s why it’s so important to understand all that stuff we talked about, the capital growth, the neighbourhood itself, the people who live there, the economics, you know, those big picture items. Those are what really matter in the long run.
So, as we wrap things up here, what are some of the I don’t know the big takeaways, what should people listening remember, especially if they’re feeling a little, I don’t know, overwhelmed by all this information.
Honestly, just remember that knowledge is power, right? The more you understand about how real estate works, you know, the more confident you’re going to feel when it’s time to make the decisions.
And it’s okay to ask for help,
right? Oh, absolutely. If you’re not sure about something, talk to somebody, a good real estate agent, a financial adviser, even like a friend or a family member who’s been through it before. Right.
For sure. And speaking of knowledge, I thought it was a really interesting question like something to think about. What if you did make decisions based only on the median house price? What kind of mistakes could you make? What would you miss?
Ooh, that is a good one. Okay, let’s say you’re looking at two neighbourhoods. One, the median house price is $500,000. The other it’s $300,000. Now, you might just automatically think, okay, well, the more expensive area, that’s the better investment.
But what if those higher prices are just because a bunch of like, you know, fancy new mansions were just built? It’s skewing the data, right? What if that $300,000 neighbourhood is actually about to like totally take off? Maybe there are new businesses moving in, some cool development projects. You never know, right? You might totally miss out on an amazing opportunity just because you’re stuck on that one number. Or, let’s flip it. You see a lower median price and you think score what a steel but hold on what about the schools are they any good is there a lot of crime what’s the job market like you have to think about all of that
it really all comes back to that you know to that idea that real estate is about so much more than just the price right it’s the whole package the location when you buy what the market is doing at that moment everything we’ve been talking about today
Exactly it’s all connected.
Well I think that’s a wrap for this deep dive. Hopefully this has given everyone some tools some things to think about so they can make those smart decisions. Don’t be afraid to, you know, to do a little research, ask questions, and trust your gut.
Couldn’t have said it better myself.
Until next time, everyone, happy investing.
