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Rising Home Values Amid Falling Median Prices: What It Really Means for You

You may have seen recent headlines suggesting that home prices are dropping compared to last year, causing a lot of confusion in the market. As a buyer or seller, it’s easy to jump to the conclusion that prices are going down. But here’s what those numbers don’t show you: home values are still on the rise, despite a slight dip in median prices. Let’s break down what’s really happening so you can better understand the current market conditions and make informed decisions.

 

The Key Difference: Smaller Homes, Not Lower Values

The recent dip in the median home price is mainly due to smaller homes being listed on the market. Remember, the median price represents the midpoint of all homes for sale at a given time. This number shifts based on the size and type of homes listed—not necessarily because of changes in overall value.

 

Imagine you have three coins: two dimes and a nickel. If you add another nickel to the mix, the median value of the coins drops, but the individual value of each coin remains unchanged. The same logic applies to housing prices.

 

According to Danielle Hale, Chief Economist at Realtor.com, “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.” This explains why the median price can fall while true home values continue to increase.

 

Price Per Square Foot: A More Accurate Picture

A reliable way to gauge home values is by looking at the price per square foot. This figure reveals what buyers are paying for space, providing a clearer measure of actual value. Recent data shows that even though the median asking price has dropped, the price per square foot is still rising across the nation.

 

Ralph McLaughlin, Senior Economist at Realtor.com, notes 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.” The Federal Housing Finance Agency (FHFA) also supports this, reporting, “Nationally, the U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.”

 

Local Trends and Why They Matter

While national trends give us the bigger picture, real estate is still highly local. The situation in your area could differ from the national outlook, which is why it’s crucial to work with a knowledgeable agent to understand your specific market.

 

The Bottom Line

The drop in median price does not mean home values are falling. Instead, it reflects an increase in smaller, less expensive homes on the market. Price per square foot is a better indicator of market value, and those prices are continuing to rise.

 

For a deeper understanding of the real estate market and insights specific to your area, give me, Teresa Hill, a call. I’m here to guide you through every step and make sure you get the most out of your real estate experience.

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