The market's less obvious effect on home prices
Many things influence home prices. Demand or lack of it. Supply -- too much, too little, just right. Building-material costs. Land values. Zoning rules.
When it comes to price averages, though, it's useful to remember that they can move in mysterious ways that don't necessarily reflect what any actual homeowners are seeing in their own values.
If you've been reading my stories for a while, you've probably seen some variation of my skewing warning: The change in the average price is influenced by the sorts of homes people are buying this year vs. what others bought last year. So if many buyers opt for houses this year but were tending toward smaller condos a year ago, the average will rise even if those houses sold for less than they would have before. (This affects the median price, too.)
Ross Mackesey, a Long & Foster sales manager, wrote commentary on July home sales in the Baltimore region that offers some price-skewing examples.
Why, for instance, did average and median prices rise so strongly in Anne Arundel County last month? The median increased nearly 8 percent, according to Metropolitan Regional Information Systems; the average jumped about 12 percent. Are BRAC buyers rushing in, declaring, "Money is no object"?
Well, no. He thinks BRAC is supporting that part of the region's housing market a bit, but mainly he sees a shift in buying patterns. The first-time buyer market was "reduced to a trickle" in the absence of the federal tax credit, he writes. But homes priced above $450,000 were "still selling at spring’s pace."
In Baltimore, meanwhile, the average price fell 14 percent last month while the median plummeted 23 percent. Another sort of price-moving factor is at play here:
"You don’t pay too much attention to average prices with these market forces playing such a prominent role," Mackesey writes.
I always feel like I'm on more solid ground when I'm talking about the number of homes sold than the average or median price the sellers got. Still, it's not as if the price figure is telling us nothing -- it's just a message that takes some untangling. Buying trends swinging wildly? That's a good thing to know.
Have you noticed changes in what people are buying and selling in your neck of the woods?