Tuesday, May 1, 2007 | It’s simple to track price movements in most financial markets.
One share of Coca-Cola stock, to cite one of endless examples, is priced identically to any other share of stock in that company. An ounce of pure gold from one mine is worth the same as an ounce extracted from a mine on the other side of the world.
In contrast, every home is different. Even two houses with identical floor plans in the same neighborhood may have different views, lot sizes, fixtures, traffic noise, landscaping, Indian burial ground proximity … the list goes on.
This lack of fungiblility, as it is known, makes it difficult to determine the changes to a home’s marketable price. If someone sells a share of Coke stock for $50, that means that for the time being, your Coke shares (and everyone else’s, for that matter) are all worth $50. But if someone sells a house down the street for $500,000, that gives you a far more limited idea either about how much people would pay for your house or about what’s happening with home prices in general.
In short, it’s tough to measure changes in home prices with any accuracy. But that doesn’t stop people from trying.