{"id":8121,"date":"2023-08-21T10:30:00","date_gmt":"2023-08-21T10:30:00","guid":{"rendered":"https:\/\/thezakariagroup.com\/why-median-home-sales-price-is-confusing-right-now\/"},"modified":"2023-08-21T10:30:00","modified_gmt":"2023-08-21T10:30:00","slug":"why-median-home-sales-price-is-confusing-right-now","status":"publish","type":"post","link":"https:\/\/thezakariagroup.com\/why-median-home-sales-price-is-confusing-right-now\/","title":{"rendered":"Why Median Home Sales Price Is Confusing Right Now"},"content":{"rendered":"
\"Why<\/p>\n

The National Association of Realtors<\/em> (NAR) is set to release its most recent Existing Home Sales<\/em> (EHS) report tomorrow. This monthly release provides information on the volume of sales and price trends for homes that have previously been owned. In the upcoming release, it\u2019ll likely say\u00a0home prices<\/a>\u00a0are down. This may seem a bit confusing, especially if you\u2019ve been following along and reading the blogs saying home prices have hit the bottom and have since\u00a0rebounded<\/a>.<\/p>\n

So, why would this say\u00a0home prices\u00a0<\/a>are falling when so many other price reports say they\u2019re going back up? It all depends on the methodology of each one. NAR reports on the\u00a0median home sales price, while some other sources use\u00a0repeat sales prices. Here\u2019s how those approaches differ.<\/p>\n

The\u00a0Center for Real Estate Studies\u00a0at\u00a0Wichita State University<\/em>\u00a0explains<\/a>\u00a0median sales prices like this:<\/p>\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\u00a0. . .<\/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><\/blockquote>\n

Investopedia\u00a0<\/em>helps define what a repeat sales approach\u00a0means<\/a>:<\/p>\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><\/blockquote>\n

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

As the quotes above say, the approaches can tell different stories. That\u2019s why median home sales price data (like EHS) may say prices are down, even though the vast majority of the repeat sales reports show prices are\u00a0appreciating again<\/a>.<\/p>\n

Bill McBride, Author of the\u00a0Calculated Risk\u00a0<\/em>blog,<\/em>\u00a0sums<\/a>\u00a0the difference up like this:<\/p>\n

\u201c<\/em>Median prices are distorted by the mix<\/em><\/strong> and repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices.\u201d<\/em><\/p><\/blockquote>\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

<\/a>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.<\/strong><\/p>\n

That\u2019s why using the median home sales price as a gauge of what\u2019s happening with home values may be confusing right now. Most buyers look at home prices as a starting point to determine if they match their budgets. But most\u00a0people buy homes based on the monthly mortgage payment they can afford, not just\u00a0the price of the house. When\u00a0mortgage rates<\/a>\u00a0are higher, you may have to buy a less expensive home to keep your monthly housing expense affordable. <\/strong><\/p>\n

That\u2019s why a greater number of \u2018less-expensive\u2019 houses are selling right now \u2013 and that\u2019s causing the median home sales price to decline.\u00a0But that doesn\u2019t mean any single house lost value.\u00a0<\/strong><\/p>\n

When you see the stories in the media that prices are falling later this week, remember the coins. Just because the median home sales price changes, it doesn\u2019t mean home prices are falling. What it means is the mix of homes being sold is being impacted by\u00a0affordability<\/a>\u00a0and current\u00a0mortgage rates<\/a>.<\/p>\n

Bottom Line<\/h3>\n

For a more in-depth understanding of home price trends and reports, reach out to a local real estate professional.<\/p>\n<\/div>\n

Powered by WPeMatico<\/a><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"

The National Association of Realtors (NAR) is set to release its most recent Existing Home Sales (EHS) report tomorrow. This monthly release provides information on the volume of sales and price trends for homes that have previously been owned. In the upcoming release, it\u2019ll likely say\u00a0home prices\u00a0are down. This may seem a bit confusing, especially […]<\/p>\n","protected":false},"author":101010,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[110,99,100,102,108,884],"tags":[],"jetpack_publicize_connections":[],"yoast_head":"\nWhy Median Home Sales Price Is Confusing Right Now - The Zakaria Group<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/thezakariagroup.com\/why-median-home-sales-price-is-confusing-right-now\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why Median Home Sales Price Is Confusing Right Now - The Zakaria Group\" \/>\n<meta property=\"og:description\" content=\"The National Association of Realtors (NAR) is set to release its most recent Existing Home Sales (EHS) report tomorrow. 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