Note that the reported median is not the midpoint of all house prices. Instead, the median is the midpoint of houses that actually closed escrow. In difficult times, the houses that tend to sell are the nicer ones. Therefore, the 2006 median reflects nicer houses, on average, than those sold in 2005, and the 2007 median pertains to even nicer (bigger, newer, etc.) houses than those in 2006. No wonder the median doesn’t drop as much.
That said, house prices are known to be sticky on the way down. Sellers become emotional and unrealistic and end up losing money chasing the market down, or waiting for a rebound. All this pain would go away faster if sellers apply this rule: if you don’t have to sell, then don’t; but if you do sell, then drop price enough so that it sells in 30 days or less.
