There's some news coming out tomorrow from the National Association of Realtors (NAR). They're gonna release the Existing Home Sales (EHS) report, which tells us about the number of homes sold and the prices they're going for. From what we're hearing, it looks like the report might mention that home prices have gone down. I know it might seem a bit weird because you may have been reading blogs that say home prices have hit rock bottom and are now going up again.

You're wondering why this one report is saying that home prices are falling while a bunch of other reports are saying they're going back up, huh? Well, it all comes down to how each report collects their data. The NAR (National Association of Realtors) focuses on the median home sales price, whereas other sources might use repeat sales prices. Let me break it down for you.

““The median sale price measures the ‘middle’ price of homes that sold, meaning that half of the homes sold for a higher price and half sold for less . . . For example, if more lower-priced homes have sold recently, the median sale price would decline (because the “middle” home is now a lower-priced home), even if the value of each individual home is rising.””

— Center for Real Estate Studies at Wichita State University

““Repeat-sales methods calculate changes in home prices based on sales of the same property, thereby avoiding the problem of trying to account for price differences in homes with varying characteristics.””

— Investopedia

The Challenge with the Median Home Sales Price Today

So, like, you know how those quotes up there say different things? Well, that’s because the approaches they use to measure home prices can tell different stories. It’s kinda like when the median home sales price data (like EHS) shows that prices are down, but most of the repeat sales reports actually show that prices are going up again. Can you believe that? It's like two totally different tales about what's happening in the housing market.

““Median prices are distorted by the mix and repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices.””

— Bill McBride, Author of the Calculated Risk

Let me break it down for you in a more casual way. Imagine you have three coins in your pocket - one nickel and two dimes. If you line them up in order of their value, from lowest to highest, the middle one would be 10 cents. But, if you have two nickels and one dime, the middle one would now be worth five cents. That's basically how median value works!

So basically, whether it's a nickel or a dime, they both still have the same value. A nickel is worth five cents and a dime is worth 10 cents. So, no matter what, the value of each coin remains the same.

You know, it can get pretty confusing trying to figure out what's really going on with home values just by looking at the median home sales price. I mean, sure, most of us start by checking out the prices to see if they fit our budgets. But let me tell you, when it comes down to actually buying a home, it's more about the monthly mortgage payment we can handle, not just the price tag. See, when mortgage rates are high, we might have to settle for a cheaper home so that we can keep our monthly housing costs within our reach.

You see, more and more of the cheaper houses are being bought these days, which is actually bringing down the overall average price of homes being sold. But don't get me wrong, this doesn't mean that any particular house has actually lost its value.

When you catch a glimpse of those headlines about prices going down later this week, don't jump to conclusions just yet. You see, when they talk about the median home sales price changing, it doesn't necessarily mean that home prices as a whole are dropping. It's actually more about the kinds of homes being sold and how affordable they are in relation to the current mortgage rates. So, it's all about the mix of homes being sold and the impact they have on the overall market.

Bottom Line

If you want to dive deep into home price trends and reports, let's connect. We can explore all the nitty-gritty details together to give you a better understanding. Hit me up whenever you're ready!