Recent headlines have highlighted a decline in the median asking price of homes compared to last year, which has created some confusion. As a buyer or seller, it’s tempting to think this indicates that home prices are on the decline. However, it’s important to understand that these figures don’t provide the complete picture.

Nationally, home values are increasing, despite a slight drop in the median price. Let’s clarify what’s truly occurring to help you navigate the market without being swayed by alarming headlines.

Homes on the Market Right Now Are Smaller

The main reason for the decrease in median prices is the size of the homes currently being sold. The median price shows the midpoint of all the homes available for sale at a specific time, and this can change based on the variety of homes on the market.

Here’s a straightforward way to understand the median. Imagine you have three coins in your pocket and you arrange them from lowest to highest value. If you’ve got one nickel and two dimes, the median, or the middle value, is 10 cents. But if you switch it up and have two nickels and one dime, then the median changes to five cents.

A nickel is still worth five cents, and a dime is still worth ten cents—those values haven't changed. The same applies to housing; its value remains consistent.

There's currently a larger selection of smaller, more affordable homes available, which is contributing to a decrease in the overall median price. However, this doesn't indicate that home values are actually falling.

Danielle Hale, Chief Economist at Realtor.com, elaborates:

““The share of inventory of smaller and more affordable homes has grown, which helps hold down the median price even as per-square-foot prices grow further.”
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— Danielle Hale, Chief Economist at Realtor.com

Here’s the information to back that up.

Price Per Square Foot Is Still Rising

One effective way to gauge home values is by examining the price per square foot. This figure gives you an idea of what you're paying for the actual space within the home.

The median asking price doesn't consider the sizes of different homes, so it might not accurately represent their true value. Recent data on the national price per square foot indicates that home values are still on the rise, even though the median asking price has fallen.

Ralph McLaughlin, a Senior Economist at Realtor.com, explains that...

““When a change in the mix of inventory toward smaller homes is accounted for, the typical home listed this year has increased in asking price compared with last year.”
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— Ralph McLaughlin, Senior Economist at Realtor.com

Smaller homes are influencing the median price, but the average home value is still on the rise. The Federal Housing Finance Agency (FHFA) reports this trend.

““Nationally, the U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.”
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— Federal Housing Finance Agency (FHFA)

While some headlines might suggest that prices are dropping, there's no need for concern. A closer examination with more dependable data reveals that prices are actually still increasing on a national level.

Home prices can really differ depending on where you are. Although national trends give you a general overview, local markets might be facing their own unique situations. The best way to understand what’s going on in your area is to consult a trusted agent.

Bottom Line

The drop in median price doesn’t mean home values are decreasing. The lower median asking price mostly reflects the larger presence of smaller, more affordable homes available right now.

Let's focus on price per square foot; it's a more accurate reflection of market value, and those prices continue to rise. If you have any questions about home prices in our area, don’t hesitate to reach out.