Meeting in the middle - what does Median Home Price mean?

Have you heard the term median home price? When articles, media and websites state what the median home price is for a specific area, does that mean that most houses are that price? Does it mean that the entry level home price is that amount? If the median home price goes down, does that mean the housing market is crashing?

Here in Tehachapi, the median home price has been trending upward consistently for the last several years. As of October, the median home price is $310,000 and is up 6 percent over this time last year. It is up $28,000 just since mid-summer. We have seen the same year over year trend for all of 2019/20 and it is expected to continue through 2021. So, what does it mean and what is the "bubble" that everyone keeps talking about or waiting for?

First, a bubble by definition is a run-up in housing prices fueled by demand, speculation and exuberant spending to the point of collapse. Many people speculate a bubble because we have a supply and demand issue across the country, bidding wars on current inventory, paying cash over asking price and other demand market behaviors. But this alone does not mean we are in a bubble that will result in a major real estate market crash. Housing and housing prices have a cycle and there are corrections in the market that create a temporary slowing of appreciation, or even a slight loss in value but the overall trend is up and corrections are usually short lived as supply and demand always change.

The mid-2000 housing bubble is still very fresh in our minds and could easily be contributing to the fear that it will repeat itself. In the interest of article length, I won't go into that here but if you are interested or concerned, do yourself a favor and research what caused it and the tech bubble that preceded it... or call me and ask. There are significant differences between then and now primarily with lending practices and speculators.

With a bubble, there is generally a catalyst and, yes, right now we have a unique pandemic and economic uncertainty... but that alone is no guarantee that it is all going to end badly for housing. In fact, bad news can often be good news for the housing industry and future projections see a positive outlook for housing. Just look at interest rates. Lending is still very tight and qualifying has no shortcut button like in the mid-2000s, but low rates are making it more affordable for people to buy a house and more affordable to buy a higher priced house. Which leads me full circle to the median home price question.

The median home price is not the entry level price for the area. It is simply the middle number for homes that are sold. Said another way, half the houses sold for the month of October 2020 sold above $310,000 and half the houses sold below $310,000. Part of this is due to lower interest rates making higher priced homes more affordable. Part is due to lack of inventory at the lower amounts. Also, we are seeing an increase of cash buyers for higher priced homes because this community is already more affordable than surrounding areas. When looking to buy, work with a local realtor and lender who know the area and the market, and can advise you on the trends and projections.

You can contact Alysha Boles at (661) 858-7214, or visit http://www.advisoralysha.com. See ad on this page.