We’re always looking for new ways to improve the MVA. Most recently, owing to issues observed during our field validation in Indianapolis and Philadelphia, we made an adjustment to the way we calculate median home values to account for the growing number of condos appearing in our data. This post gives some background behind our new methodology; we call it “condo adjusted sales prices.” This is not something we’ll do in every city, but where the market calls for it, we have a new tool in our box.
In many ways, condo prices operate differently than the rest of the homeowner market. Although condos are often less expensive than single family (SF) homes, they carry additional costs, like HOA fees, that don’t show up in our sales price data. A $215,000 condo with a monthly HOA fee of $375 would have the same monthly owner costs as a mortgage on a $300,000 SF home. Conversely, in some downtown areas, new luxury condos sell at a premium over the existing stock of older SF homes.
This creates a problem when measuring median home values for the MVA. Condos can artificially depress the median value of an otherwise more expensive area. Adjusting for price per square foot could help (homes are usually larger than condos), but our experience is that square footage data in city administrative records are unreliable and generally don’t account for the quality of space.
To calculate condo adjusted sales prices we compare the median price of SF homes in an area with the median price of all homes (SF and condos) and take the larger of the two values. In areas where condos are priced lower than other homes, our median sales figure only includes SF homes. In areas where condos sell at similar or more expensive prices than homes, we include both condos and SF homes.
This adjustment produced results that were more consistent with our field observations and underscored for us just how important that field validation is for creating a proper MVA.
Below shows some examples of how the new measure works. Let us know what you think.