{"id":979,"date":"2023-06-21T18:58:21","date_gmt":"2023-06-21T18:58:21","guid":{"rendered":"https:\/\/johnsonteamrealestate.com\/?p=979"},"modified":"2023-06-23T19:12:52","modified_gmt":"2023-06-23T19:12:52","slug":"why-the-median-home-price-is-meaningless-in-todays-market","status":"publish","type":"post","link":"https:\/\/johnsonteamrealestate.com\/index.php\/2023\/06\/21\/why-the-median-home-price-is-meaningless-in-todays-market\/","title":{"rendered":"Why the Median Home Price Is Meaningless in Today\u2019s Market"},"content":{"rendered":"\n
\"\"\/<\/figure>\n\n\n\n

The National Association of Realtors<\/em> (NAR) will release its latest Existing Home Sales <\/em>(EHS) report later this week. This monthly report provides information on the sales volume and price trend for previously owned homes. In the upcoming release, it\u2019ll likely say home prices<\/a> are down. This may feel a bit confusing, especially if you\u2019ve been following along and seeing the blogs saying that home prices have bottomed out and turned a corner<\/a>.<\/p>\n\n\n\n

So, why will this likely say home prices<\/a> are falling when so many other price reports say they\u2019re going back up? It all depends on the methodology of each report. NAR reports on the median sales price<\/strong>, while some other sources use repeat sales prices<\/strong>. Here\u2019s how those approaches differ.<\/p>\n\n\n\n

The Center for Real Estate Studies <\/em>at Wichita State University <\/em>explains<\/a> median prices like this:<\/p>\n\n\n\n

\n

\u201c<\/em>The median sale price measures the \u2018middle\u2019 price of homes that sold, meaning that half of the homes sold for a higher price and half sold for less <\/em><\/strong>. . . For example, if more lower-priced homes have sold recently, the median sale price would decline (because the \u201cmiddle\u201d home is now a lower-priced home), even if the value of each individual home is rising.\u201d<\/em><\/p>\n<\/blockquote>\n\n\n\n

Investopedia<\/em> helps define what a repeat sales approach means<\/a>:<\/p>\n\n\n\n

\n

\u201c<\/em>Repeat-sales methods calculate changes in home prices based on sales of the same property<\/em><\/strong>, thereby avoiding the problem of trying to account for price differences in homes with varying characteristics.\u201d<\/em><\/p>\n<\/blockquote>\n\n\n\n

The Challenge with the Median Sales Price Today<\/strong><\/h4>\n\n\n\n

As the quotes above say, the approaches can tell different stories. That\u2019s why median price data (like EHS) may say prices are down, even though the vast majority of the repeat sales reports show prices are appreciating again<\/a>.<\/p>\n\n\n\n

Bill McBride, Author of the Calculated Risk <\/em>blog,<\/em> sums<\/a> the difference up like this:<\/p>\n\n\n\n

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\u201cMedian prices are distorted by the mix and repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices.\u201d<\/em><\/p>\n<\/blockquote>\n\n\n\n

To drive this point home, here\u2019s a simple explanation of median value (see visual below<\/em>). Let\u2019s say you have three coins in your pocket, and you decide to line them up according to their value from low to high. If you have one nickel and two dimes, the median value (the middle one) is 10 cents. If you have two nickels and one dime, the median value is now five cents.<\/p>\n\n\n\n

\"\"\/<\/a><\/figure>\n\n\n\n

In both cases, a nickel is still worth five cents and a dime is still worth 10 cents. The value of each coin didn\u2019t change.<\/p>\n\n\n\n

That\u2019s why using the median home price as a gauge of what\u2019s happening with home values isn\u2019t worthwhile right now. Most buyers look at home prices as a starting point to determine if they match their budgets. But, most people buy homes based on the monthly mortgage payment they can afford, not just the price of the house. When mortgage rates<\/a> are higher, you may have to buy a less expensive home to keep your monthly housing expense affordable. A greater number of \u2018less-expensive\u2019 houses are selling right now for this exact reason, and that\u2019s causing the median price to decline. But that doesn\u2019t mean any single house lost value.<\/strong> <\/p>\n\n\n\n

When you see the stories in the media that prices are falling later this week, remember the coins. Just because the median price changes, it doesn\u2019t mean home prices are falling. What it means is the mix of homes being sold is being impacted by affordability<\/a> and current mortgage rates<\/a>.<\/p>\n\n\n\n

Bottom Line<\/h3>\n\n\n\n

For a more in-depth understanding of home price trends and reports, let\u2019s connect. Contact Johnson Team Real Estate today 360.303.2734!<\/p>\n","protected":false},"excerpt":{"rendered":"

The National Association of Realtors (NAR) will release its latest Existing Home Sales (EHS) report later this week. This monthly report provides information on the sales volume and price trend for previously owned homes. In the upcoming release, it\u2019ll likely say home prices are down. This may feel a bit confusing, especially if you\u2019ve been […]<\/p>\n","protected":false},"author":1,"featured_media":980,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-979","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-uncategorized","8":"entry"},"featured_image_src":"https:\/\/johnsonteamrealestate.com\/wp-content\/uploads\/2023\/06\/20230620-why-the-median-price-is-meaningless-in-todays-market-600x400.jpg","featured_image_src_square":"https:\/\/johnsonteamrealestate.com\/wp-content\/uploads\/2023\/06\/20230620-why-the-median-price-is-meaningless-in-todays-market-600x410.jpg","author_info":{"display_name":"fawn","author_link":"https:\/\/johnsonteamrealestate.com\/index.php\/author\/fawn\/"},"_links":{"self":[{"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/posts\/979","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/comments?post=979"}],"version-history":[{"count":1,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/posts\/979\/revisions"}],"predecessor-version":[{"id":981,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/posts\/979\/revisions\/981"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/media\/980"}],"wp:attachment":[{"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/media?parent=979"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/categories?post=979"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/tags?post=979"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}