Understanding the Existing Homes Report: Median is Out

Understanding the Existing Homes Report: Median is Out helps make sense of real estate news. Are you confused by national real estate news? Does a median home price range seem either high or low? I represent buyers and sellers on The Main Line PA, and much of my job is to strategize with clients on the right time to buy or sell, and this is where national numbers play a role. The National Association of Realtors (NAR) releases its monthly Existing Home Sales (EHS) report, providing valuable insights into the sales volume and price trends of previously owned homes. It is important to understand the methodology behind these reports to interpret the data correctly. Let’s explore why the upcoming EHS report may indicate falling home prices, despite other reports suggesting an upward trend.

NAR reports the median sales price, while other sources use repeat sales prices. The distinction lies in how each approach measures changes in home prices. The median sale price represents the “middle” price of homes sold, with half of the homes sold at a higher price and the other half at a lower price. If a greater number of lower-priced homes are sold, the median sale price will decline, even if the value of individual homes is increasing.Whereas repeat sales methods focus on changes in home prices based on sales of the same property, eliminating the challenge of accounting for price differences due to varying characteristics. 

Although median price data, including the EHS report, may indicate falling prices, other repeat sales reports suggest an appreciation in home values. Experts, such as Bill McBride from the Calculated Risk blog, argue that repeat sales indexes like Case-Shiller and FHFA provide more accurate measurements of prices. Buyers often determine home affordability based on their monthly mortgage payment rather than the price of the house alone. When mortgage rates are higher, buyers may opt for less expensive homes to maintain affordable monthly expenses. This preference for “less-expensive” houses impacts the mix of homes sold and contributes to a decline in the median price.

While the upcoming EHS report may indicate falling home prices, it’s critical to consider the affordability factor and the influence of current mortgage rates. When you are searching for your Main Line home and are trying to understand current market conditions and what you can afford, contact us to discuss your unique case.

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