Home Values Are Rising Even as Median Prices Fall

Recent headlines have mentioned a drop in the median asking price of homes, but that doesn’t mean home values are declining. The truth is, home values are still increasing despite the dip in median prices. This confusion comes from a shift in the types of homes on the market, with smaller, more affordable homes becoming more common.

Why the Median Price Is Falling

The median price reflects the middle value of all homes for sale, and with more smaller, lower-priced homes available, it appears that prices are falling. However, this doesn’t mean the actual value of homes is decreasing. In fact, the price per square foot, a more accurate measure of home value, continues to rise, showing that home values are still appreciating.

Price Per Square Foot Is the Key Metric

One of the best ways to understand true home value trends is by focusing on the price per square foot. While the median price is influenced by the types of homes being sold, the price per square foot looks directly at the cost of space in homes, offering a clearer picture of how values are changing. Recent data shows that home values continue to climb, even though the mix of homes on the market is bringing the median price down.

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."

Understanding Local Markets

While national trends show that home values are still rising, it’s important to remember that real estate markets vary by region. Some areas may see different trends, and that’s why working with a local real estate agent is crucial. They can give you the most accurate picture of what’s happening in your specific market and how it affects your homebuying or selling decisions.

Bottom Line

The drop in the median asking price is more about the types of homes on the market than a reflection of falling home values. Home values are still increasing, as seen in the rising price per square foot. If you’re trying to understand how these trends impact your local market, connecting with a real estate agent is the best way to get the full story.