Predicting the Future

For the most part, statistics are actually more useful in looking back at what’s happened as opposed to predicting what might occur. Unfortunately, that means that we’re virtually guaranteed to miss shifts in market conditions as they occur as well as the opportunity to profit from them.

Fortunately, the Arizona Regional Multiple Listing System has begun offering a new tool that actually does give us at least a reasonable glimpse of what’s to come. It’s called the ARMLS Pending Price Index™ and it uses the pending sales in the MLS system to forecast forecasts Average Sales Price and Median Sales Price in succeeding months.

There are, of course, several cautionary points to make. The first is that these are valley-wide numbers and that I expect that both Scottsdale and MMR will outperform the general market (certainly, their prices will be higher J).  

Next there is the hopefully obvious fact that the index is not a guarantee of what's to come and that the predictive value of the numbers declines as the index moves further out into the future. As with all forecasts, its real value lies providing a glimpse into the future to assist in "molding expectations and planning reactions to those expectations".

The latest version of the index (see chart above) suggests that the Median Sales Price in November will increase to $127,000, only to fall in December to $110,000, and then rally to $115,000 in January.

At the same time, the Average Sales Price for November is also predicted to increase to $171,400 only to fall significantly in December to $153,300, and then rally in January to $159,100.

Unfortunately, it seems that the short bursts of optimism experienced in the earlier part of the year have given way to some more regressive trends. However, as the index indicates, there is optimism for the first quarter of 2011.