Your clients see the headlines - in April, the median price of a resale home in California was down 36%.
But does that mean your client's home has lost 36% of it's value?
The answer is... not necessarily.
For many consumers, the median price is a misunderstood number.
The median price does not track the value of individual homes... rather, it reflects what types of homes are selling in a given market.
To establish a definition, the median price is that point where 50% of the homes that sold in a given time period were priced higher than the median, and 50% were priced lower than the median.
If, three years ago, half the sales were above $500,000 and half were below it, the median price was $500,000.
If, today, half the sales are above $350,000 and half are below it, the median price will be $350,000.
Yes, most homes have lost value over the past few years. And the drop in values has been greatest at the entry level, where the impact of "no income qualifying" has hit the hardest. But a 36% drop in median price does not automatically equate to a 36% loss of value.
If lower priced homes (where the majority of foreclosures are occuring) are dominating the market, the median price is going to fall.
The median price is a reflection of where buyers are in the market... and right now, buyers are all about the lower end of the market.
