Today's median sales price is more of a reflection of the mix of home prices rather than a decrease of 23% of home values.

Sellers with homes in the $1,000,000 plus price range requiring a Jumbo mortgage are sitting on the sidelines. Financing for these larger loan amounts have become expensive in comparison to the 2005 interest rates.

Prior to the housing bust the spread between a Jumbo mortgage and conforming loan was about 1/4 to 3/8% . Today that spread is 1 to 2% depending on the quality of the borrower.

You will get no argument from me that home values in Maryland have declined however I don't think we have seen a 23% decline in value across the board. It's more about the mix of home prices being sold today.

Hi, TC -- thanks for noting the impact of home-sale mix. That definitely has an impact (though the jumbo-loan issues were already in place in 2007, so it's not completely apples to oranges).

It's not an analysis I can repeat often (if ever), but I did look at years of home sales last fall to see how much homes went for when they resold. That's apples to apples if anything is. In the metro area, homes that sold in 2006 and resold in the first half of 2009 had a 20 percent drop in price.

Jamie, the huge increase in spread from Conforming to Jumbo loan amounts didn't hit until near the end of 2007, August /September.

This almost overnight increase of 1 1/2% spread from the prior 1/4% was a direct result of the collapse of the two Bear Stearn's Hedge Funds. After the collapse a month or so later an auction of their Mortgage Backed Securities (MBS) was held selling for 96% of face value. This auction created a 4% discount to all MBS market values instead of the prior 100% of face value.

Yes there was an limited amount of impact in 2007 but nothing like 2008, 2009 and today.

Your comment on a 20% drop in price from a 2006 purchase reselling in 2009 is reasonable. In hindsight this was the beginning of the end in run away home appreciation. :-)

Oh, that's right -- the tightening that had already hit subprime hadn't worked its way to jumbo until the summer. (I should have remembered that, since I wrote a story in August '07 about jumbo troubles.) Thanks for the details!

Someone missed the day they taught the difference between median and mean.

To TC, both the average and the median can be affected by the mix of homes selling. Or were you getting at something else?

Trimming a small number of large units at the top extreme does not have a meaningful impact on the median. The number of sales close to the median outnumber the outliers too much to allow for it.

There were a lot of high-end sales in the boom years, though -- especially if you look at everything over $500,000. So I'd expect that the sharp drop in those sales would have a noticeable effect on the median as well as the average. (How much that's true of now vs. '07 -- as opposed to now vs. '05 -- I just don't know.)

But the average price can get skewed more easily, that's for certain.

Jamie, my comments are directed at the average or median sales price mix of homes being sold today verses 2006.

We had a higher number of $700,000 plus price homes being sold in 2006 than today. These higher priced homes will drive up or down the average or median price depending on the number of units sold.

My other point was part of this decline in higher priced homes sales was due to rapid increase in Jumbo mortgage interest rates.

I know, TC. My previous two comments were responding to the "To TC" commenter. Oh the confusion!

TC-
If I recall, it has been over two years since FHA and Conforming loans increased their loan limits up to 729k depending on the county you live in. Most people who buy million dollar homes have at least 30% to put down on the purchase. Do you not think that they would be eligible for that type of financing? The spread on those rates are minimal. Regardless, most people that have million dollar homes have personal relationships with the banks they deal with. A portfolio loan from their local bank is most likely who they would deal with anyway.