Wednesday, November 28, 2012

Median House Prices Rising

Median Real estate prices are up. Real estate prices are down. Investors help fuel the housing market. Investors destroy the market. The news is all over the map. So what is the real scoop when it comes to the varying statistics you read - or hear - regarding rising real estate values? For example, Lawrence Yun, chief economist for the National Association of Realtors (NAR), has reported that the median sales price for real estate is up by a little more than seven percent (7%) from last year. He also projects that those prices will continue to go up to as much as fifteen percent (15%) next year. Whoa! Really?

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.
If the above factors stay in place for a little while, there is a good chance that median home prices will continue to go up as long as your house is not located in a low-foreclosure area.

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