Are Home Prices Really Dropping?

If you've taken a scenic drive through towns like Scarborough or Gorham recently, you might've noticed changes in the real estate landscape. But with the NAR's upcoming EHS report, you could be scratching your head. It's hinting at a dip in home prices, yet you've read elsewhere that home values are bouncing back. What gives?

It boils down to how we measure home prices.

Cracking The Median Sales Price Code

Our friends at the Center for Real Estate Studies at Wichita State University break down the median sales price concept:

"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."

Considering Southern Maine’s charm, from the picturesque coasts of Old Orchard Beach to the rustic allure of Buxton, it's no wonder properties are constantly being sold.

Repeat Sales: A Different Tune

Investopedia offers clarity on the repeat sales method:

"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.”

Thus, while median home sales price data might suggest a downtrend, repeat sales often paint a rosier picture of appreciating home values.

Bill McBride, a well-regarded voice in real estate analytics, succinctly captures this disparity:

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

Visualize the concept of median value with this: Think coins - nickels and dimes. Their individual worth remains constant, but the median value shifts based on their quantity in a collection.

This serves as a potent reminder that the median sales price doesn’t always align with a home's intrinsic value. Given Southern Maine’s appeal and the diverse range of homes from Wells to Brunswick, many buyers are scouting for properties that align with their budget – often influenced by current mortgage rates.

Connecting the Dots

When you stumble upon headlines announcing plummeting prices, think of those steadfast coins. A shift in median home sales price doesn’t necessarily signify falling home values. Rather, it reflects the array of homes selling, driven by present-day affordability and mortgage rates.

In Conclusion

Dive deeper into the intricacies of Southern Maine's home price narratives by getting in touch. And while you're contemplating real estate, don't forget to explore my website tools like the property valuation tool or mortgage calculator for a more comprehensive home-buying journey.