Recent headlines have been buzzing about the median asking price of homes dropping compared to last year, and that’s sparked plenty of confusion.
As a buyer or seller, it’s easy to assume that means prices are coming down. But those numbers don’t tell the full story.
Nationally, home values are actually rising, even if the median price has dipped slightly.
Let’s break down what’s really happening so you can better understand the housing market without getting caught up in fear-driven headlines.
Homes on the Market Right Now Are Smaller
The biggest reason for the dip in median price is the size of homes being sold. The median price reflects the middle point of all homes on the market, and that number is affected by the mix of inventory.
To understand how this works, imagine lining up three coins from lowest to highest value.
If you have one nickel and two dimes, the median coin is 10 cents. But if you have two nickels and one dime, the median becomes five cents—even though the value of each coin hasn’t changed.
The same principle applies to housing. Today, more smaller and less expensive homes are on the market, which pulls the median price down. That doesn’t mean home values are declining.
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.”
Price Per Square Foot Is Still Rising
One of the most reliable ways to measure home values is price per square foot. This metric accounts for size and shows how much buyers are paying for the space inside a home.
The median asking price doesn’t adjust for home size, which is why it can sometimes paint a misleading picture.
The latest national price-per-square-foot data shows values are still increasing—even while the median price dips.
As Ralph McLaughlin, Senior Economist at Realtor.com, explains:
“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.”
This means that while smaller homes are affecting the median price, overall home values are still trending upward.
According to the Federal Housing Finance Agency:
“Nationally, the U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.”
While national trends show continued growth, it’s important to remember that real estate is local. Conditions can vary by area, and a trusted agent can help interpret what’s happening in your specific market.
Bottom Line
A decline in median price does not mean home values are falling. The dip is largely due to a higher number of smaller, more affordable homes on the market.
Price per square foot is the better indicator of value—and those prices are still rising.
If you have questions about what home prices are doing in your area, reach out to a local real estate professional for insights specific to your market.
