Why Median Home Sales Price Is Confusing Right Now

The National Association of Realtors (NAR) is gearing up to release its latest report on Existing Home Sales (EHS) tomorrow. This monthly report gives info about how many homes were sold and what they cost. The upcoming release might show that home prices are down. This might seem a bit confusing, especially if you've been reading blogs saying that home prices hit the lowest point and have been going back up.

But why would this report say that home prices are dropping when other reports say they're going up? It all has to do with how they measure things. NAR looks at the average price homes are sold for, while other sources look at how much the same homes sold for before. Here's how that works.

Think of the average price like finding the middle price of all the homes sold. If more cheaper homes are sold recently, the average price goes down (because the "middle" home is now cheaper), even if each home's value is rising.

The other way is to look at how much the same homes were sold for before. This helps to see how prices change over time without worrying about differences in the homes.

So, why does this matter? Well, when you hear that the average price is dropping, it doesn't mean all homes are worth less. It's more about which kinds of homes are being sold more often. Right now, more affordable homes are being sold, so the average price goes down. But that doesn't mean every single home is worth less.

So, when you see news saying prices are going down, remember that it's about the mix of homes being sold, not every home's value. Most people look at prices to see if they can afford a home, but they also think about how much they'll pay each month. When interest rates are higher, people might buy cheaper homes to keep monthly costs down.

To sum it up, when you hear about prices going down, think about it like coins in your pocket. If you have more pennies and fewer dimes, the average value might go down, but the value of each coin is still the same. It's not that home prices are falling, it's just that the types of homes being sold are changing based on how much people can afford.

For a better understanding of all this, let's talk!