A market conditions adjustment derived from median prices shows a 9 percent annual rise, but resale pairs show 4 percent. What is the likely explanation?
Correct Answer
D) The mix of properties sold has shifted over time
Why this is correct: The mix of properties sold has shifted over time. The governing concept is the difference between median price change and paired-sale analysis. Median price can rise because larger or higher-quality homes are being sold (a change in mix), not because individual properties appreciate. Resale pairs track the same property over time, isolating pure price change. Why the other choices are wrong: The resale pairs must contain a recording error is an assumption not supported by the facts. The medians are always the more reliable measure is false; for measuring pure appreciation, paired sales are superior. Nine percent should be adopted as the higher figure is wrong without analysis; the lower paired-sale figure may be more accurate for the subject property. Exam tip: For time adjustments, paired sales are better than median price trends because they control for changes in the quality mix of sold properties.
Why This Is the Correct Answer
Why this is correct: The mix of properties sold has shifted over time. The governing concept is the difference between median price change and paired-sale analysis. Median price can rise because larger or higher-quality homes are being sold (a change in mix), not because individual properties appreciate. Resale pairs track the same property over time, isolating pure price change. Why the other choices are wrong: The resale pairs must contain a recording error is an assumption not supported by the facts. The medians are always the more reliable measure is false; for measuring pure appreciation, paired sales are superior. Nine percent should be adopted as the higher figure is wrong without analysis; the lower paired-sale figure may be more accurate for the subject property. Exam tip: For time adjustments, paired sales are better than median price trends because they control for changes in the quality mix of sold properties.
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