What You Need To Know About Home Price News
If you're keeping up with home pricing news, it is important to understand the way that The National Association of Realtors (NAR) reports the numbers. Our primary mission at The Mullin Group is to provide clarity to our community, therefore here is some context for the information you may be seeing on home pricing. Headlines can be deceiving and misleading, but that is primarily because NAR will report the median sales price, while other home price indices report repeat sales prices. While most repeat sales indices indicate that prices are appreciating once again, the median price reported by NAR might paint a different picture.
At The Mullin Group, we believe that relying solely on the median home price to gauge changes in home values may not be ideal in the current market. The Center for Real Estate Studies at Wichita State University highlights this issue, stating that the median sale price reflects the middle price of homes sold but it does not provide a useful measure of home price appreciation because it can be influenced by the composition of homes that have been sold.
For example, if there has been an increase in lower-priced home sales, the median sale price would decrease, even if the value of individual homes is actually rising. People make home buying decisions for many factors including their monthly mortgage payments, and not solely on the house's price. When mortgage rates rise, buyers may need to purchase a less expensive home to keep their monthly expenses affordable. As more "less-expensive" houses are sold there is a decline in the median price, but it doesn't necessarily imply that any specific house has lost value.
NAR even admits that "changes in the composition of sales can distort median price data,” as the median value represents the middle point within a set of values, and changes in composition can affect this measurement.
The concept is similar to what we are seeing with the real estate market. While the median price may indicate a decline, it is crucial to consider the composition of sales and the larger trends within the market. Understanding these nuances helps us provide more accurate and insightful information to our clients.
The Mullin Message
When analyzing home pricing trends, it is essential to go beyond the median price and consider other indices that focus on repeat sales prices on specific homes in specific neighborhoods. By gaining a comprehensive understanding of the market dynamics that are specific and relevant to your personal goals and recognizing the limitations of certain data points, buyers and sellers can make more informed decisions and navigate today's complex real estate landscape with confidence. At The Mullin Group, we remain dedicated to providing you with valuable insights and guidance to help you achieve your real estate goals. Check out our resources page today to start evaluating the right real estate wealth development and lifestyle plan for you.