The problem with comparing one year’s median to the another is that it’s based on the assumption that the same mix of units sold during both periods – this leads to the assumption that the typical home increased or decreased roughly in line with the averages. As long as the mix of units DOES stay constant from one period to the next this assumption is reasonable. It’s when the different market segments are acting in different ways that the assumption proves unreasonable.
The way I analyze it is by parsing the data into different categories in the same zip areas. Older homes tend to sell for less than newer homes and smaller homes tend to sell for less than bigger homes. This current cycle started in the late 1990s so I use that as a dividing line; and I use 3,000 SqFt as the divider in both age ranges. In effect, this puts the data into one of 4 categories. When you do this you can very clearly see the different distribution of data for this year vs. last year – we have more newer and larger homes selling this year, which has propped up the averages for the zip area.
There’s probably a dozen different ways to do this type of analysis, I just chose the parameters that were quick and easy.
