Is the Housing Market Really Declining? Let's Break It Down

If you’ve seen recent headlines announcing that median home asking prices are dropping, you might be wondering if this signals a decline in the real estate market. It’s understandable—after all, the idea of falling prices can spark confusion and concern for both buyers and sellers. But don’t worry! The headlines don’t tell the whole story.

In reality, home values on a national level are still rising, even though the median asking price has dipped slightly. In Brevard County the median sales price September 2024 is up 5.11% from last year and the median asking price has stabilized at just a .22% increase from last year. Let’s dive into what’s really happening to help you understand the market more clearly without getting caught up in the fear-inducing headlines.

Why Are Median Home Prices Dropping?

The key reason for the drop in the median asking price is the type of homes currently for sale. Median price simply represents the middle price point of all homes on the market, and it can be heavily influenced by the mix of properties available.

Right now, there are more smaller, less expensive homes for sale, and that’s pulling the median price down. However, this doesn’t mean home values are actually decreasing.

Here’s an example to make it clear: Imagine you have three coins—one nickel and two dimes. If you line them up by value, the middle one (the median) is a dime, or 10 cents. Now, if you have two nickels and one dime, the median is now a nickel, or five cents. Even though the median has dropped, the actual value of each coin hasn’t changed.

Similarly, homes have not decreased in value; it’s just that smaller homes are making up a larger share of what’s being sold. 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: A Better Indicator of Home Value

A more accurate way to assess home value is by looking at the price per square foot. Unlike the median price, this metric adjusts for the size of the home, giving you a more consistent view of home values.

The latest data confirms that the price per square foot is still climbing, even as the median asking price drops. This means that while smaller homes are pulling the median down, home values in general are still increasing.

Ralph McLaughlin, Senior Economist at Realtor.com, sums it up nicely:

“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.”

And it’s not just anecdotal evidence—according to the Federal Housing Finance Agency (FHFA):

“Nationally, the U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.”

So, while the media may report falling median prices, home values are still appreciating nationally.

Regional Differences: Why Local Markets Matter

While national data is useful for understanding big-picture trends, it’s important to remember that real estate markets vary widely by region. Some areas may experience different price trends depending on local factors like supply and demand, job growth, and buyer preferences.

This is where working with a local real estate expert comes in handy. They can provide insights into your specific market, helping you understand whether home values in your area are rising, falling, or holding steady.

FAQs

Q: Does a drop in median home price mean home values are falling?
A: No. The drop in median price is primarily due to smaller, less expensive homes being listed for sale. Home values, as measured by price per square foot, are still rising.

Q: What’s the best way to track home values?
A: Price per square foot is a more accurate indicator of home value than the median price. It accounts for the size of the home, offering a clearer picture of the market.

Q: Are home prices rising or falling nationally?
A: Home values are still appreciating nationally, as confirmed by the Federal Housing Finance Agency, which has reported consistent annual home price appreciation since 2012.

Q: How can I tell what’s happening in my local market?
A: Local real estate conditions can vary. It’s best to consult with a trusted real estate agent who understands your area to get an accurate read on home values where you live.

Bottom Line

Don’t let the headlines mislead you. While the median asking price has dipped, this is largely due to a higher number of smaller homes on the market. Home values are still increasing, and price per square foot remains a reliable way to measure them. If you’re curious about home prices in your area or want more clarity on the market, reach out to a real estate professional for personalized advice.

Sources:

1. Realtor.com

2. Federal Housing Finance Agency