The National Association of Realtors (NAR) will release its latest Existing Home Sales (EHS) report later this week. This monthly report provides information on the sales volume and price trend for previously owned homes. In the upcoming release, it’ll likely say home prices are down. This may feel a bit confusing, especially if you’ve been following along and seeing the blogs saying that home prices have bottomed out and turned a corner.

So, why will this likely say home prices are falling when so many other price reports say they’re going back up? It all depends on the methodology of each report. NAR reports on the median sales price, while some other sources use repeat sales prices. Here’s how those approaches differ.

The Center for Real Estate Studies at Wichita State University explains median prices like this:

“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.”

Investopedia helps define what a repeat sales approach means:

“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.”

The Challenge with the Median Sales Price Today

As the quotes above say, the approaches can tell different stories. That’s why median price data (like EHS) may say prices are down, even though the vast majority of the repeat sales reports show prices are appreciating again.

Bill McBride, Author of the Calculated Risk blog, sums the difference up like this:

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

To drive this point home, here’s a simple explanation of median value (see visual below). Let’s say you have three coins in your pocket, and you decide to line them up according to their value from low to high. If you have one nickel and two dimes, the median value (the middle one) is 10 cents. If you have two nickels and one dime, the median value is now five cents.

In both cases, a nickel is still worth five cents and a dime is still worth 10 cents. The value of each coin didn’t change.

That’s why using the median home price as a gauge of what’s happening with home values isn’t worthwhile right now. Most buyers look at home prices as a starting point to determine if they match their budgets. But, most people buy homes based on the monthly mortgage payment they can afford, not just the price of the house. When mortgage rates are higher, you may have to buy a less expensive home to keep your monthly housing expense affordable. A greater number of ‘less-expensive’ houses are selling right now for this exact reason, and that’s causing the median price to decline. But that doesn’t mean any single house lost value. 

When you see the stories in the media that prices are falling later this week, remember the coins. Just because the median price changes, it doesn’t mean home prices are falling. What it means is the mix of homes being sold is being impacted by affordability and current mortgage rates.

Bottom Line

For a more in-depth understanding of home price trends and reports, reach out to a local real estate professional.

Why the Median Home Price Is Meaningless in Today's Market in San Antonio, TX: A Comprehensive Analysis by Grell Realty Group

In today's dynamic real estate market, relying solely on the median home price as a measure of affordability or value can be misleading. San Antonio, TX, is no exception, as the local real estate landscape undergoes significant shifts and trends. In this comprehensive analysis, we will delve into why the median home price may not accurately reflect the current market conditions and discuss the factors that influence home prices in San Antonio. The expert insights and services of Grell Realty Group and The Grell Team will be your guiding force throughout this exploration.

1. Understanding the Median Home Price:
The median home price is a statistical value that represents the middle point in a set of home sale prices, where half of the properties sold for more and half sold for less. It is often used as a benchmark to gauge affordability and general market trends. However, it has limitations in capturing the nuances of today's real estate market, particularly in San Antonio.

2. Variability in Property Types:
San Antonio offers a diverse range of property types, including single-family homes, condos, townhouses, and multi-family dwellings. Each property type has its own price range and unique market dynamics. The median home price fails to differentiate between these property types, resulting in a generalized figure that may not accurately reflect the segment of the market that interests you. The Grell Team specializes in understanding these property nuances, ensuring that you receive tailored guidance and accurate information based on your specific needs.

3. Neighborhood and Location Factors:
The location and neighborhood of a property have a significant impact on its value. San Antonio is a city with various neighborhoods, each with its own character, amenities, and desirability. The median home price does not consider these location-based factors, which can greatly influence a property's market value. The Grell Realty Group's local expertise allows them to provide detailed insights into specific neighborhoods, helping you make informed decisions that align with your preferences and investment goals.

4. Property Size, Features, and Upgrades:
Home prices are heavily influenced by factors such as square footage, number of bedrooms and bathrooms, lot size, and overall condition. The median home price fails to account for these specific attributes and any additional features or upgrades a property may offer. The Grell Team understands the importance of these details and can assist you in finding homes that align with your desired size, amenities, and lifestyle preferences.

5. Supply and Demand Dynamics:
The real estate market in San Antonio, like any other city, is subject to supply and demand forces. Fluctuations in inventory levels and buyer demand can greatly impact home prices. The median home price does not consider these dynamic factors, resulting in a generalized representation that may not accurately reflect the market conditions at any given time. The Grell Realty Group constantly monitors market trends, providing you with up-to-date information on supply and demand dynamics that may influence your buying or selling decisions.

6. Market Conditions and Economic Factors:
The overall economic climate, interest rates, and local market conditions play a vital role in determining home prices. San Antonio's real estate market is influenced by factors such as job growth, population trends, and development projects. These factors can cause prices to fluctuate independently of the median home price. The Grell Team possesses a deep understanding of the local market and can provide valuable insights into these economic factors, empowering you to make informed decisions that align with your financial goals.

Conclusion:
While the median home price may serve as a general indicator of market trends, it fails to capture the intricacies and unique dynamics of today's real estate market in San Antonio, TX. Relying solely on this metric can be misleading and may not provide an accurate representation of the value or affordability of properties. The expert guidance and comprehensive services offered by Grell Realty Group and The Grell Team ensure that you have access to accurate and detailed market information, enabling you to navigate the San Antonio real estate market with confidence. Contact Grell Realty Group today to partner with experienced professionals who prioritize your needs and help you make informed decisions in this evolving market.