To help you follow the numbers, here are some helpful definitions: Median price. An often used indicator of the strength and direction of a housing market, a median price is the midpoint of all the prices of homes sold in a given area during a specified period. Mid point means half the homes sold for higher prices and half the homes sold for lower prices. The median isn't the same as the average, which would be calculated by totaling all the prices and dividing by the number of prices. The median price can be affected over time by the characteristics and sizes of homes sold as well as price trends. For example, if the market shifts from starter homes to luxury mansions, the median price will increase even if homes are not appreciating in value. Seasonally adjusted. Housing markets are naturally more active in the spring and summer months because people prefer to move during the longer warmer days and between school years. That pattern means it's difficult to make meaningful comparisons between results for different months or quarters of the same year. To overcome this hazard, economists statistically tweak the reported number of homes sold during various periods to reflect seasonal variations. The tweaked numbers are denoted as "seasonally adjusted." Price discount. The "price discount" is the percentage difference between the seller's initial asking price and the actual purchase price of the same home. For example, if a home were priced at $300,000 and sold for $291,000, the discount would be 3 percent. Price discounts are usually reported as an average for a set of home sale transactions. A small percentage, on average, means the market favors sellers, while a large average discount signals a buyer's market. Unsold inventory index. This index, which indicates the pace of the market, is calculated by measuring how long it would take for all the homes currently on the market to be sold at the current rate of sales. A smaller index is a positive sign for sellers, while a higher number is good news for buyers. Affordability index. An affordability index measures whether a typical family can qualify for a standard mortgage to purchase a typical home. A "typical" family is defined as one that earns the median income in a given area, and a "typical" home is defined as a median-priced single-family house in the same area. An index value of 100 means a median-income family has exactly the amount of income needed to purchase a median-priced home. A number higher than 100 means the family's income is more than adequate, while a number less than 100 means the typical family can't afford to buy the typical home. These are sometime converted into percentages that look like this: "28% affordability", means 28% of the working household earn a medium income and can qualify for a medium price home, given a normal set of financing parameter such as 20% down, 30 year mortgage at 6.5% interest and qualifying credit. Its no wonder that most people get confused over "Whose on First Base"? Days on The Market. "DOM" measures the actual number of days a property has been actively for sale. Sounds simple until you consider the variables. Are you looking at the number of days from a given agent? What if three different agents had it for sale. You also need to look at how many days at its current price? What if it had several price reductions and was put up as a new listing each time? In fact all are relevant time line to consider.
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Sellers and homeowners have a insatiable appetite for information about the housing markets. What are prices doing, are they up or down? Is it a sellers or Buyers market? Is now a good time to sell? Reports and newspapers provide some useful answers, but the information is usually hard to interrupt unless you understand what figures they are using and how to correctly use them. What is a "median price"? What does "seasonally adjusted" mean? Who understands "the unsold inventory index?" or how do you accurately determine "Days on The Market"?
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