I’ve been thinking about the way we measure real estate and then how we interpret the information. I use “we” as a general term as in “we the people.” If I buy a stock or a pound of rice, it is a uniform item that I can track what is worth at any given moment.

Real estate isn’t a commodity so doesn’t work like that. If 123 Main Street sells today, it becomes a part of the average and median price of today. We compare that average and median to previous years to determine appreciation. We don’t compare the price of 123 today compared to previous sale price. We can’t. There are so many variables that could have occurred since the previous sale (remodels or lack of, change of neighborhood, etc). IRS cost basis might be more accurate but far from perfect.

The average time between sales is seven years for real property. Even when we can look at the sale and resale of 456 Main Street, it doesn’t necessarily reflect what happened at 457 Main Street.

How do we overcome this and still have numbers that lead to an accurate reflection of the “market?”