We’ve got some changes to announce that will affect the way we cover the region’s housing market. Most notably, we’re going to move away from using DataQuick Information System’s median price as one of our key indicators for what housing prices in the region are doing.

It seems every month after I talk to the economists or market analysts around San Diego about what prices are doing, I feel obligated to include a paragraph or two of context for why many of them say the median is a misleading number. (And many of them greet my call with incredulity — “You’re still using the median price, Kelly?”)

The median is calculated by taking the prices of all of the homes that sold in a month, putting them in order from smallest to biggest, and picking the one exactly in the middle. That means half of the homes sold for more than the median price, and half of the homes sold for less.

One of the best, most concise explanations of the problems with using the median price is here, by Rich Toscano. In that piece, Toscano shows that the following factors contribute to the murkiness of the median:

  • changes in who’s doing the buying
  • changes in what buyers are getting for the money
  • home improvements
  • seller concessions.

Those things and others mean that the median could be going up or staying stable even while some houses are auctioned for huge discounts and surrounding homes must drastically reduce their asking prices to compete. Another huge quirk with price indicators is that they don’t account for the homes that just aren’t selling because their sellers can’t or won’t lower their prices to be competitive.

So, here’s what we’re going to do. If you follow our coverage, you know we usually post the DataQuick numbers in Survival (in our affectionately named DataParty) in the middle of the month, then follow it up the next day with a data-heavy story about the previous month. We’ve been focusing those stories on the sales rates and the median prices reported by DataQuick.

We’re still going to post those DataQuick numbers when we get them, like today. (We’ll have those numbers for you in just a bit.)

But instead of that next-day, data-heavy story relying almost entirely on the DataQuick numbers, we’re going to move that full story to the last week of the month, to coincide with the release of a different housing index, the Standard & Poor’s Case-Shiller Home Price Index. That index measures repeat sales of the same house over years, so it compares a recent home sale price with the sale of the same home the last few times it was sold.

For example, the Case-Shiller HPI for San Diego for July showed a 7.8 percent drop in prices compared to July 2006. The median, as reported by DataQuick, showed a 2.2 percent year-over-year drop.

There are a couple of drawbacks to using the Case-Shiller HPI — notably, its lag time. The index is calculated using data from the month before last. So when we get those numbers on Oct. 30, they’ll be for August.

But I think the extra time will give us (and our analyst sources) an ability to see these trends from a new perspective, with more context. And we’ll have the chance to gather a wider diversity of “guests” to the DataParty — we’ll work to compile an omnibus story with data on sales, prices, cancelled listings, foreclosures and, we hope, more data on what kind of mortgages homebuyers are using.

A frequent perspective I receive in e-mails from you is thankfulness for our responsibility and honesty in reporting about such an emotional financial situation. Tweaking our coverage, in this way or in another, is an important way to maintain those characteristics.

Of course, I also hear from you when you’re disgruntled or upset with our coverage, and I hope you won’t stop sending your thoughts my way. As always, click my name below to send me an e-mail.


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