Median Home Prices Part II

Today the SJ Mercury reported today in the business section that median home prices jumped 26% year over year, the nation’s second-biggest percentage.  The article goes on to discuss how “prices” are up, and lists the “Metro Home Prices which had the biggest yearly price gains”.  Sounds like good times are here again for all homeowners!  Or does it mean that?

Reading further into the article Karl Lee, President of the Santa Clara County Association of Realtors points out that “Silicon Valley has seen a significant increase in sales of homes worth $1 million or more”. Lawrence Yun, chief economist of the National Association of Realtors, adds that recorded (median) home prices “…were significantly depressed last year because of a large percentage of distressed homes sold at discount”.

Both statements are correct and are the exact reasons why the press should not equate the movement in median prices to the movement in home values.  So while the Mercury News article concludes that an increase in median home prices equals “home price gains” the two authorities they quote tell them why it doesn’t.

We know that prices are effected by supply and demand.  Therefor, we review months of inventory available in your neighborhood and price segment to determine the balance of supply and demand.  The lower the months of inventory the stronger the market which at a certain level indicates there is upward pressure on local home prices.  We confirm this by reviewing the percentage of list price received for recent home sales.  if the percentage of list is close 100% or more of full asking price then prices are rising.  Why?  Most asking prices are determined by the other most recent sales so if over asking is received then prices are rising.

Real estate reporters are frightening simplistic in the articles about home prices.   Shows you have to be careful who you believe when reviewing the state of the housing market in your area!