Median Housing Prices - It All Depends on Investor Math
While Yun stated the median price to be up by 7+ percent, other analysts quoted percentages significantly lower. According to MSN Real Estate, S&P Chase Schiller reports a more modest two percent (2%) increase each year and other sources quote between three and five percent (3-5%). So why all the variance? Part of it has to do with how each statistical entity determines the "median". In the case of the NAR, the median is considered to be the mid-dollar amount between the half of the houses which sold for lower and the half of the houses which sold for higher. In years with more investor activity, where more low-end homes are sold, the median price will be driven down. Currently, the crawling foreclosure market has actually helped the median real estate prices by keeping investors away.
Foreclosures are usually significantly lower priced properties but they can be incredibly frustrating to buy. Instead of the typically smooth real estate transaction which happens between two real estate agents, lenders are usually involved in foreclosure transactions. This can make things more complicated. As a result, investors are starting to balk, which has helped to keep lower-end properties from moving. Thus - due to "investor-based real estate math - median prices continue to rise.
There are other factors which are keeping the median housing price on the literal up-and-up.
- Loan Modifications. Creative loan modifications have enabled home owners who might have lost their homes in previous years to refinance and adjust their monthly mortgage to a more manageable amount. This is keeping some potentially lower-priced homes off the market.
- Decrease in Foreclosure Completions. Bank delays, among other things, have had such a dramatic impact that foreclosure rates are down by as much as thirty percent. That keeps the bulk of the real estate transactions in the higher-end, which allows the median prices to rise.
- New Construction. Now that new construction is beginning to pick back up, first time home buyers are moving into houses at market price which are considered to be higher-end. This scores another point in the increasing median home price column.