What's a Quartile?

[scott14]

Altos Research analyzes local housing markets in four (4) equal parts determined by price level, known as "quartiles."

For example, if there are 80 homes for sale in a market (city or zip code), four "quartiles" (groups) are generated with 20 properties in each quartile based on individual property prices.

Quartile 1: Most expensive 25% of properties
Quartile 2: Next 25%
Quartile 3: Next 25%
Quartile 4: Least expensive 25% of properties

Quartile data enables market trend analysis at various price levels in a specific geography (zip code, city, region). Every day, real estate professionals and home owners are asking the all-important question - "How's the market?"

Real estate is local so the strength or weakness of a market depends on geography. But it also depends on price level. It's quite possible that a local market, such as a specific zip code, may be trending in different ways depending on the price level in which you are buying or selling. In a city or zip code that has a number of starter-homes or first-time home buyers at the lower end of the market, the market may show signs of weakness because of the recent mortgage market events or overall slowdown in housing demand.

But...

In that same city or zip code, the top end of the market might be strong. These homes buyers and sellers may not be impacted as greatly by sub-prime and adjustable rate mortgages. Or there is limited supply in a desirable neighborhood that remains in high demand regardless of overall economic or housing market conditions. So it's not just where you are, but also in which price level you are.

Quartile trending enables this visibility into relative demand levels at the high-end of the market compared to the low-end of the market.

Quartile analysis is available for every market statistics collected by Altos Research (i.e. price, days-on-market, price per square foot, median age, etc.).

Use Quartile analysis to further understand how local market conditions affect you as a home owner and affects your clients as a real estate professional.

[jlb]

As an example of how we divide the data into quartiles - consider the following 8 properties for ZIP code 12345:

A: $100,000
B: $200,000
C: $150,000
D: $250,000
E: $125,000
F: $170,000
G: $275,000
H: $210,000

We then order the properties by price, highest to lowest:

G: $275,000
D: $250,000
H: $210,000
B: $200,000
F: $170,000
C: $150,000
E: $125,000
A: $100,000

Next, we divide that list into 4 equal parts:

Top Quartile:
G: $275,000
D: $250,000

Upper Quartile:
H: $210,000
B: $200,000

Lower Quartile:
F: $170,000
C: $150,000

Bottom Quartile:
E: $125,000
A: $100,000

Keep in mind that in many of our AltosCharts URLs, we use short hand notation to refer to these groups:

Top Quartile = t
Upper Quartile = u
Lower Quartile = l
Bottom Quartile = b

For more details, see the AltosCharts Reference Guide.

[scott14]

I had this question emailed to me by an Altos Research client with regard to viewing market activity (New Listings and Absorbed properties) and I thought I'd pass along the response to everyone. The market data by "Quartile" really helps to manage client expectations based on their price level as a buyer or seller.

Here's the question:

"Are there more homes coming to market in a certain price range or quartile? Maybe more in one quartile than the others?"

You can view the number of "New Listing" and "Absorbed" properties each week in the "Characteristics per Quartile" table in your Altos Market Reports.

In both the Executive Summary and Market Update Reports, your reports include a table that shows the number of New Listings per Quartile each week, and the number of Absorbed properties each week.

This enables you to determine if there more market activity at the high vs. low ends for that particular market.

Check out the attached file - this is the Altos Research Report for Bethesda, MD from May 29, 2008. The "Characteristics per Quartile" reveals some very interesting dynamics about the market based on price levels. Lots of activity at the the bottom end of the market - significantly lower DOM and more Absorbed than the top end.

Imagine showing this information to prospective buyer or seller to manage their expectations!!

[scott14]

Quartiles, by definition, are 25% of the market's inventory, so all quartiles are exactly equal in terms of their sample size. As properties come on and off the market, the actual properties in each quartile might change.

For example, if a bunch of super expensive homes come on the market (Quartile 1), then this will push a couple of the lowest priced properties in Quartile 1 down into Quartile 2. The quartiles are dynamic each week depending on the inventory that comes on and off the market that week.