Andrey Kamenov, Ph.D. Probability and Statistics
We all know that the home prices are slowly rising. The question is, what type of homes are driving the increase — cheap homes or expensive ones?
Let us split the home prices into four groups — from the top 25 percent to the bottom 25 percent by sale price. To better understand the dynamics of prices, we plot the ratio of the average price in the top three groups to the bottom one.
As we see here, the prices in the both middle groups are relatively stable compared to the cheapest homes. On the other hand, the average price of the most expensive homes is now 3.15 times higher than the lowest quartile’s value. Namely, those prices are $525k and $167k respectively. While that’s certainly a large difference, it is actually down from 3.55 times in 2000 and even 3.88 times in 2005. Basically, the price difference has been shrinking since 2005, and while the decrease was not as rapid in the recent years, the trend is still there.
We also must note that while 315 percent is the average across the United States, there are some regions where the number is significantly higher.
The most extreme difference between the cheapest and the most expensive homes is registered in the Middle Atlantic, which saw a difference of over four times. The price difference is significantly higher than the average in the Pacific and all Eastern divisions except for New England, which, along with the West North Central region, resides on the other side of the spectrum.
About Andrey Kamenov
Andrey Kamenov, Ph.D. Probability and Statistics
Andrey Kamenov is a data scientist working for Advameg Inc. His background includes teaching statistics, stochastic processes and financial mathematics in Moscow State University and working for a hedge fund. His academic interests range from statistical data analysis to optimal stopping theory. Andrey also enjoys his hobbies of photography, reading and powerlifting.
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