If you’ve seen recent headlines about the median asking price of homes dropping, you might be worried that home values are plummeting. But that’s not the full story. In reality, home values are still on the rise, even as the median price has dipped slightly. Let’s break down what’s really happening in the market so you can make informed decisions without getting caught up in misleading headlines.
Homes on the Market Are Smaller
The main reason for the dip in the median asking price is the mix of homes currently for sale. Median price refers to the middle point of all homes listed for sale, and this number can be affected by the types of homes on the market.
Here’s an easy way to understand it. Imagine you have three coins: one nickel and two dimes. The median value of these coins is 10 cents. But if you swap one of the dimes for a nickel, the median drops to five cents. The value of the individual coins hasn’t changed, just the mix of them.
Similarly, right now, more smaller, less expensive homes are on the market, which is bringing down the overall median price. That doesn’t mean that home values are dropping.
As Danielle Hale, Chief Economist at Realtor.com, explains:
“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.”
So, while the median price is lower, the value of homes is still increasing.
Price Per Square Foot Is a Better Measure of Home Values
One of the best ways to measure home values is by looking at the price per square foot. This metric shows how much you’re paying for the actual space inside the home. Unlike the median price, price per square foot accounts for the size of the home, making it a more reliable indicator of market value.
Recent data shows that the national price per square foot is still rising, even as the median asking price has dropped. This means that while smaller homes are affecting the median price, the value of a typical home is still going up. Ralph McLaughlin, Senior Economist at Realtor.com, confirms this:
“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.”
So, don’t be misled by headlines about falling prices—home values are still appreciating.
National Trends vs. Local Markets
It’s important to keep in mind that while national trends give a big-picture view, home prices can vary significantly by region. According to the Federal Housing Finance Agency (FHFA), the U.S. housing market has experienced positive annual appreciation every quarter since 2012. However, local markets may be experiencing different conditions.
That’s why it’s essential to work with a trusted real estate agent who can provide insights into what’s happening in your specific area.
Bottom Line
The drop in the median asking price doesn’t mean home values are falling. It’s mostly due to the increased number of smaller, less expensive homes on the market. To get a clearer picture of the market, focus on price per square foot, which is a more accurate measure of home values—and those prices are still going up.
If you’re concerned about home prices in your area, reach out to a local real estate agent for personalized insights into your market. Don’t let the headlines cause unnecessary fear—home values are still climbing, and now may be a great time to make your move!