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What You Need To Know About Home Price News

The National Association of Realtors (NAR) releases the Existing Home Sales Report, which includes median home prices. However, relying solely on median prices can be misleading. Let's explore why and consider a more comprehensive perspective on home price movements.

The Composition Effect:

The median sale price represents the middle price of homes sold. But it's influenced by the mix of homes sold, leading to potential distortions in value appreciation.

Monthly Mortgage Payments Matter:

Buyers focus on monthly mortgage payments rather than the overall price. When rates rise, they opt for more affordable homes, impacting the median price. However, individual home values may still be increasing.

Recognizing Limitations:

NAR acknowledges the limitations of median prices due to changes in sales composition. Looking beyond the median price is crucial for a more accurate understanding of home price trends.

Understanding Median Value:

Consider three coins in your pocket. The median value changes based on the mix of coins, but the worth of each coin remains the same. Similarly, median prices can be influenced by the types of homes sold, not individual home values.

While median home prices provide a snapshot, they have limitations in measuring value accurately. Actual home values generally appreciate, even if the median price suggests otherwise. Consult a real estate professional for a comprehensive understanding of local market trends and make informed decisions.


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