Why Most Real Estate Stats Are Misleading (And Could Cost You Thousands)

What's up, party people? We've got your DFW Real Estate Weekly for the week, and there's a lot to get to. A lot of misleading, damaging, dangerous, potentially willfully harmful information out there, and a lot of it are statistics. And what I mean by that is there's a lot of numbers out there that are intended not to help you. They're not intended to help you make wise choices as you buy and sell and lease and invest in real estate. They are often not intended to deliberately harm you, but they have no care or concern about helping you. And that's true of, I think, most statistics, especially when it comes to residential real estate. So what we have here is articles, media reports, things like this that are being written, created, videoed, published, put out there as if it is useful to you. And I'm here to tell you it is worse than useful to you. It is often really, really dangerous for you to pay attention to and harmful to you. Now, I am not saying that all of this is done on purpose. I am saying that from time to time, I think it is done on purpose. So when a big media outlet throws out a statistic, I'm not saying they're trying to hurt your home purchase or sale. What I'm saying is they're likely hurting your home purchase or sale. Now we're going to unpack why I think that. Real quickly, just as a quick teaser, I'm going to tell you that from time to time, I do think real estate agents, mortgage lenders, real estate brokerages are actually trying to mislead you with bad statistics. I don't think the majority of agents and brokerages are doing that, but I think some people are. Do I think that they're scheming in dark, smoky rooms at night? No. But do I think that somewhere in the gray area of ethics, they're trying to persuade you to buy or sell more for their benefit than yours? Yes, I do. And so if you're not aware of which statistics are true and authoritative and reliable, regardless of whether they serve a specific outcome or not, we are going to walk you through some of them right here on this episode right now. And when I say we, I mean, not just me, we've got full price Courtney in studio. She's here. There she is dragging that mic right across the tabletop. We also have the Yanni Donnie, the English wonder himself, our team lead, Ian Daniels. Okay. It still wasn't as bad. Like even when you tried to recreate a microphone dragging across a wooden tabletop, it didn't sound as bad. I tried my best. I gave it my best. It's what I do every day. It's because it's the joy you bring to our hearts. Plus neither of us know how to run the soundboard or the computer. Thank God for me. Yes. The producer extraordinaire. All right. So why does this matter? Why would you care? You're tuning into a DFW real estate show and you're going, I, why do I care about good, bad, ugly statistics? Well, I think it's fairly obvious. But because it's going to lead to poor decision-making because it's going to lead to either too fast or too slow decision-making buying, selling, investing, or likely terrible valuations or terrible borrowing habits or terrible inspection motivations. And I could go on and on and on, but the summary there is bad information is going to lead to bad decisions and bad decisions are going to harm you, your family, your finances, your future, your wealth building, your liability, your peace and prosperity, your joy, your sleep. And it's not more and more and more. I mean, we've all heard the nightmare stories of real estate transactions gone bad. I'm here to tell you a lot of that is due to bad misleading information. So media outlets are not licensed real estate agents. I know you knew that intellectually, but if you've never thought about it, they don't have a fiduciary relationship with you. They don't represent you. They're not there to advocate for you. And they're not regulated to do that. That's not their stated goal. Their obvious and not so publicly stated goal is to get the click, to get the view, to get the listen, to get the read, to get the traffic so they can sell advertising so that they can monetize their media platform. That's the business they're in more than ever in all the history of media. I believe they are in the get attention, sell access to the attention through marketing business. That shouldn't be a surprise to you, but for some reason, often people think that the newspaper, the magazine, or the radio program is more authoritative than their local real estate agent. And sometimes they're right, but not because the media is authoritative. It's because the local agent is that bad at times. So what we are cautioning you as a potential home buyer, home seller, investor, or just someone who's protecting your value in the DFW area is make sure that you're getting good information. The media companies where a lot of people get the bulk of their information are not in it to protect you. They're not in it to help you. Do you have a thought? I mean, the media in general is there to get as many clicks as they can on articles, no matter what the topic is. That's why you see so much negativity because negativity generally will pull people in. If it bleeds, it bleeds. Yeah. It's just like the positive stuff, the warm, happy, fuzzy things doesn't get as much attention. It's just not there. So their motivation is profitability. And I don't even blame them for that. As a matter of fact, that's their job. It's literally their business. Their shareholders want profits. So we just have to know that. And I'm not trying to be as cynical like all media is the devil. And I think most media is terrible, but I'm not here. This isn't about that. This is about saying, if you're buying or selling residential real estate, you need to have good residential real estate information to inform your purchases and your sales, your decision-making, your timeline. So me and you was talking earlier this week on a completely different topic, but we're talking about AI and we're talking about how AI will run with one idea, right? If you give it a bunch of info, it's going to find one that stands out and they're going to run and run and run with it until you tell it to stop doing that. This is no different to that, really. It's like, hey, there's thousands of things that could be reported on. Okay, this is the one that got the most traction. So we're going to run with this for like weeks on end until we decide to pick a different one. Yeah. Interestingly enough in that parallel, AI is often fixating on the topic or the thought or the idea or the data point that it thinks you value the most. And the media is doing the same thing. What are the viewers and the listeners value the most? Not what's most important to them, not what do they need, but they care about interest rates. We're going to talk about interest rates ad nauseum. And also now in an algorithm-based world, you're going to find in articles and the news stories to which you're clicking on and that you're searching. Yeah, exactly. If you begin clicking on happy things, you're going to find more happy stories and positivity. Okay. So for the sake of time and getting to the point of what I think will be valuable for our listeners today is the media can't be trusted. It's not that they're all shady dirtbags. It's just they're not in this to advocate for you. So be careful with that. Secondly, let's talk for a second about how does the data get misrepresented? What is it that causes the statistic to not be good for me? And there's a million things, but just for a couple of quick examples, one of them is the sample size. Sometimes you'll get month over month, sales are down 42% and you'll find that it's like the sample size is so small that that data is irrelevant. So for example, um, take a city like, um, you know, Sachse, Texas. Okay. March was down 22% in sales, man. That sounds like a lot. Okay. But when you realize, um, March 25 from March 26 had so many factors involved, maybe weather rain, a freeze that maybe kind of shut the market down for a couple of weeks where people just didn't get out. I mean, that could be a Also, we're only talking about the difference in 45 and 35 total home sales. Sometimes it's just because that was the amount of inventory available. Maybe a builder had more homes available last year than they do this year. And so there's all these other factors that you don't really know. And it would, it would take, you know, hundreds of hours of research to be able to truthfully say why that change happened. But you're talking about the difference in 10 sales, 10 total properties, changing hands. Like I said, that could have been weather for a week, a builder's inventory interest rates for a couple of days. Now it doesn't change the fact that technically that stat is correct, but the way you might interpret it could be really, really, really harmful to you because it would sound like the market is down 22%. Sales are down 22%, but they may be back up next month. They may have been way up the month before spring demand might have leached over into February and you didn't have the total picture there. That's why that's really, really dangerous. So it does make for an interesting headline. It does capture attention. But this could be true. This is true of like tons of different suburbs, neighborhoods, cities, towns, and even larger areas around the Metroplex at all times. This is happening where, because you don't have the total picture, that statistic could cause you to do or not do something that would be really, really, really harmful to you. The same thing can happen in pricing. I know you deal with this, Ian, all the time. You're helping our marketing specialist and the team that helps market our listings price homes all the time. And if you're not really, really careful, the wrong data points can really, really, really, really swing evaluation way off. One or two really high or really low price properties can mess up the averages when you're only averaging eight properties. And there's all sorts of reasons behind why that could be the case of those properties. And if you don't do your research and look into it, then yeah, you're going to screw up the homeowner. I think pricing is where the statistics are the most harmful and the most poorly used. So again, without spending all day on why this is wrong, because I do want to get to what's useful, what you can use and specific data points that you should avoid. But pricing can be really, really, really dangerous. And it'll be like, this is happening in the area. And we're trying to say, that doesn't mean you have to be burdened by that on your property if you're selling or refinancing, or maybe we could use that ethically in protesting your property taxes. So there's a lot going on there. The other big factor is that real estate is hyperlocal. We're not even just saying like, this is about your city. We're not even saying this is about your zip code. We're not even saying this is about your school district. We're saying this might be about the three or four house stretch of your block, where the trees are, or the lower part of the street, or the side that's more shaded, or that doesn't back up to the road. So all this data that is intended to tell you, this is what's happening. This is the oftentimes is so broad and generalized that it's of no use to you anyway. So let me add one other thing to that too, is that it could be that you're on one side of the street and it's zoned for one area or a city or a school district, and the other side of the street is zoned for a completely different one. And you might not know that. Yep. And that stuff happens all the time. And oftentimes an agent is using this media-based data and not doing their own hyperlocal research or knowing the market well enough. And that's where that can be dangerous. But most of what we're talking about is public buyer, seller, consumer use of bad data sources. Sadly, often agents are using the same bad sources of data. The other thing is just broadly a failure to keep perspective. Like just a lack of understanding of seasonality, or for example, major, major market swings are forgotten about when we look back at year over year data like COVID or a harsh winter, a brutally hot summer, power outages, weird mortgage weight swings or inflation puffs. These things can really, really, really move data and the numbers might be accurate, but they're really misleading and the data is not going to help you. It's going to hurt you in a big time way. Okay. So let's talk really quickly, Ian, for example, what are some of the stats that you hate that you're like that people use it all the time? And that's not a good one. List to sales price ratio, sir. That's my, I have taught. Pet peeve number one. I have taught and I think in a healthy way brainwashed everyone that works here to despise list price to sales price ratio. Not just the people that work here, but all the people that are in our coaching consulting group too, they would all say that's the worst one. It's the worst one. And it's also the most common one. Now, Courtney always plays the part of hardworking, innocent neighborhood mama, right? That's not living in the weeds of these statistics. Okay. So Courtney, if I said to you, Hey, Bob, the agent down the block is selling every listing they take at 100% of list price every time. What does that communicate to you? Uh, that he's getting full price. Yeah. That he's fricking killing it. Right now. What if I said to you, Courtney, after a little bit of research, it looks like Bob often prices homes 10 to 15% below what they're worth. What would you think? Um, he doesn't know how to negotiate. Yeah. Bob sucks. Yeah. Bob's getting with these numbers. Bob's getting a hundred percent of what, what he's asking for with his sellers. Well, that stat sounds like Bob's a freaking Ninja until we realized that asking price is not property value. You can pick whatever asking price you want. If I went to your house and you said, here's my house, here's the age. Here's what we did to the air conditioner. Here's how old that is. Uh, here's how much it costs for our utilities every month. Here's my lot size. Here's the schools we go to. And we evaluated all that. And I was like, okay, cool. I think your house is probably worth like $592,000 with our pricing strategy. We'll, we're probably going to ask 600 and our goal will be to create competition and drive that up and maybe get six, 10 to six 30 somewhere in that window. Right. But I think we should ask 600. I think it's current hardcore value, whatever I said, 592 or whatever. We're going to ask a little bit more, but we're hoping to get a lot more. Well, Bob comes along, doesn't care about all that. He's like, Hey, the one down the street sold for this, the one down the street. So I did cops. I compared it to three properties, minimum effort possible. And they all average to this. So we should sell your house for five 75. Uh, we're going to ask five 74, nine, we're going to have Walmart pricing. We're gonna sell this like bleach. And then someone comes along and they're like five 74, nine, we better snatch that up. And they buy it. And you're like, Bob's freaking great. Bob got every bit of what we asked for until you meet with me and our team. And we're like, no, it was worth five 92. We thought we could pretty easily get 600. And with good marketing conditions and a little bit of patience and the right strategy, we were thinking six, 10 to six 30. You left money on the table, my man. Well, potentially like $60,000, at least like 15, you know? Um, so that's happening all day, every day because Bob sucks because Bob's not good at his job. Now Bob's not a real person. I'm just using the stereotype of the bad data. I can give you one other one if you want. Okay. So first of all, let's just summarize that list to sales price ratio, which is so many brokers communicate is a terrible statistic because what it's comparing is an elective number. I could ask whatever I want. I could say, I don't even care how much money I just won the lottery. I don't care how much we get for this. Just get rid of it for me, or it's gross. And it's sad because my mother passed away and I don't want to deal with it. Just get rid of it. All sorts of different things could drive asking price. The better statistic is relative to fair market value. So we've done a deep dive analysis of what homes are worth, what they're selling for and adjusted it for all the things we just said. Size, lot size, condition, age, you know, main systems, desirability, all the things people look for. Similar homes recently sold in the area adjusted for differences and similarities are selling for this. Now, how much more or less than that did I sell for compared to actual market value, not compared to a made up asking price. That's a better statistic. But to go back to the first one, if I was to tell you, Courtney, that somebody sold a house for 550,000 times more than it was listed for, what would you think about that agent? Well, that feels a little bloated. It's true. I don't even know what he's talking about. And I'll tell you exactly how it happened. They sold it for 550,000 times more than it was listed for. Let me guess how it happened. I see this stupid stuff all the time. They convinced their seller, we're going to price it at $1 and people are going to go nuts and we're going to give no right intelligent person in the world ever thought that house, they were going to accept the dollar. But that agent thought we'll put it up for a dollar. We'll get it. And it could work honestly. In this particular case, it was in Newark and the estimated fair value of the home was between 525 and 550. And they got 550 in like a weekend or a day. And by the way, there's absolutely nothing wrong with that because you know what that agent and that seller recognized? Listing price is almost irrelevant to actual price. It's just a tool. I always say it's the headline of your property advertisement. Guess what? They didn't have to accept an offer until they got an offer that they wanted. So they could have said, we'll take any, we'll take 550. We're going to wait for that. For the folks that aren't seeing the video, Courtney's face is representing how I feel about that. Like that's a bit of a gimmick, but there may be a situation where that's not the dumbest idea ever. We've never done that. Nor do I think I ever would. The older I get, the more careful I am to say never, but the reality is it's kind of a silly strategy. How about we do it on the next house? It probably would have been more successful had they priced it at 500 where someone's like, oh, that's in the realm. But that's very, very, very low. And then you could, more people would think it's realistic, but that's a sidebar. The point is list price is a terrible data point because people could be wrong. People could be crazy. People could be manipulative. You could pick whatever you want. If you've done the true valuation and you're comparing to actual market value, worst case is you have a bad process for valuing. But if you have an honest one, that comparison becomes much more authoritative. I picture the $1 house, like I would a storage wars episode where you've got all the people standing outside of the house and they're just yelling that they want to increase it. It's like a sketchy auction. Okay. So interest rates are another stat that isn't really reliable because you hear these nationwide averages on rates and there's a lot of ways you could change your rate. You could have good credit, bad credit. You could have a lot of cash, a little cash. You could put a certain amount down. You could have certain loan programs available to you, whether it's a veteran's loan or rural land loan. You could have a private banking loan. You could have a non-banking loan. There's a ton of things that could affect your rate. But when people say, oh, rates today are at 6.65%, then that's another stat. That's another data point. That's really not very useful to an individual. You want to be talking to a good, I think local, very good lender with a track record and with a team that can help you find out what is your rate for the thing you want. And honestly, lowest rates, not even always the best thing for you. So that's another really misleading number. Let's quickly get into some numbers that are good. I already gave away one percentage of actual market value, not percentage of list price that you sold for. So we might say, look, your home sold for $32,000 over the average price for homes like yours adjusted to your specific property uniqueness. And we got exactly what we asked for, or we got a little bit less than we asked for it, but we still got way more than other homes like yours sold for. That's a way more reliable number, a lot less manipulative number. The thing that really, really matters here is we have to have good data to start with. So using like the news media, that's often using like some study that was done by a college eight States over instead of like just local sales data adjusted for things like seasonality. Oh, I know the water main was torn up on that main road over there. So those values were suppressed for a while. That local knowledge is irreplaceable when people are using massive amounts of broad market wide data over long periods of time, that data is just always going to be less reliable. So good local data comparisons to market average, not to list price. Absorption rate is another really good data point. Some people will call that months of inventory, but what you're calculating is based on the demand right now, based on how quickly buyers are buying homes, how many months of housing inventory do we have before it would be all gone? So let's just use some very basic, not realistic numbers. Let's just say in the area we're talking about, buyers are buying about 10 homes a month and there's 30 homes on the market. So we have three months of inventory because if no new homes hit the market, they'd all be bought up on average in three months because people are buying 10 a month. So if that number was one, we'd say, whoa, seller's market. There's not, there's a lot more people wanting to buy than there are homes for sale. If that number was like eight, like wool, they're buying 10 a month and there's 80 homes for sale. These buyers can be very selective and they're going to get much better deals because the sellers are having to compete for the buyers instead of the buyers having to compete for the houses. That's how we determine if are we in a buyer's market? Are we in a seller's market? Are in a stable market? So absorption rate or housing inventory, if you're getting it from an accurate source is a really good data point that you should be able to trust. And we share that type of data with our clients all the time here at the Taj Mahal. This whole show feels like when you learn what terms on your food actually mean, like the word natural is totally unregulated. Organic is at this point of just a bogus thing. Yeah. Yeah. And it, look, we know this isn't the most riveting content that we could have said like how to 10 X your home equity without lifting a finger, but we want to protect people. We are here in DFW advocating for people here in DFW. And if we can earn your trust and we're the right fit for each other, we may be your agent or broker. That's, this isn't a pitch for that. Although of course we would love to earn your business and get to know you. But the reality is we're trying to protect people from being crushed by what looks right, but is really, really lazy or not even intended to help you or serve you. And this stuff, we see it happen all the time. Sometimes people are coming to us after six months of failing to sell their house. Sometimes people are coming to us because they sold their house with a lazy dirt bag or a shady dirt bag, or just a really sweet, well-intentioned bad agent or lender or inspector or appraiser or something. And then we, we can't fully clean up the mess because what's done is done. We can dramatically improve what happens next. But if you already sold your house with a bad agent or based on bad data or with a bad loan term, because you were looking at the wrong statistics, the wrong data, we can't go back and change that usually. So we're just trying to help people. Price elasticity is another thing to think about. Everything when it comes to valuation is elastic. So Courtney, let's say you're the hypothetical we talked about before your house is worth 600,000 and next door to you, people move in. They stop mowing the yard. They put four really loud dogs in the backyard and they build a shed out of random wood they've found in dumpsters. And you can see it over the fence. What just happened to your property value? It sure as heck went down. Okay. Now on the other side, let's say nope, same house. They quickly sell and move out. Somebody moves in. They build a beautiful new fence that's even taller. They tear down the shed. They put in a pool. They landscaped the front yard. They redo the entire front face of the home with brand new brick. They paint the siding. They put in new windows and they put a little porch swing out front and it looks like Mayberry out there. It's like the Andy Griffith show. What just happened to your property value? So price is elastic. What's the Andy Griffith show? Oh, sorry that you grew up in England. Not overall, but that you didn't have the Andy Griffith show. It's one of the most wholesome things that ever happened. We can talk about it later. But the point I'm making is those are like super obvious things, but the value of your home is changing every day. Not hypothetically, realistically. But that stuff doesn't show up in the stats sometimes. You have to have a local expert that knows, ooh, there was a school board meeting last night and the decision they came to is not being well received by people around here. So there's a little bit of a negative vibe around properties over here right now. We need to be aware of that with weekend showings. Or man, they just changed the zoning over here and they're not going to be able to build any more homes for the next three years. So man, scarcity just went up. These homes are all going to be more valuable now. That doesn't show up in the data. So understanding the elasticity could be a real tool for you. And that's just not going to happen without a great local agent. So look, basically what all this means is you need good data from a good source with great local understanding. And that's all going to affect your strategy, whether you buy or sell. So Ian, good idea or not a good idea to just use whatever agent your neighbor said you should use because they know them from college. Good idea. Courtney, that was- Was that close? That was your opportunity. No, in fact, you were 180 degrees off, which is the opposite. I will learn and get better. Yeah. I appreciate your willingness to improve. It's one of our company core values. Train daily, folks. The strategy of getting this right really comes down to where are you getting your data? Where are you getting your guidance? Where are you getting your advocacy? Obviously, my name is Todd Tremonti. I run a brokerage. We run a team called the Todd Tremonti Home I'm biased, but I will say this. Even if you don't use us to buy or sell a home, you need to find someone who understands the local market, the nuances of seasonality that's going to communicate to you. This is why this is the data we're using. This is the source of this data. This is why it's reliable. This is why we might have a different opinion, a different strategy than most people in the market. And they could fully explain to you their marketing plan, their approach to negotiation, the reason they would price a property a certain way above and beyond three similar homes. So you're looking for expertise. You're looking for unique guidance. You're looking for someone that listens to you and customizes based on your wants, needs, fears, issues, obstacles, not the one size fits all. This is how it is done, person. Run from the one size fits all. Pursue customization and advocacy, good data, unique data, local understanding, and someone that's willing to walk away from something for your benefit, even though they might've made some money. So I hope this is helpful for friends, listeners, buyers, sellers, investors, renters, advocates, people just looking to enjoy your home and protect your value in the Dallas Fort Worth area. If we can ever do something for you, our information's below this episode, or you can just find us at ToddTremontiTeam.com. But we are here to help you. Whether you have hired us to have a fiduciary responsibility to you or not, we want to add value in your life. If you would like to contact us about actually leading, guiding, advocating, representing you, go to ToddTremontiTeam.com or find our information near this episode. We'll talk to you on the next one.