Now that this month’s housing data has arrived, I thought it would be a good time to briefly review the trouble with the "median price" as a measure of real estate pricing power.
Many observers, noting that the median home sale price was 2.2 percent lower in August 2006 than in August 2005, would assume that the typical home is now worth 2.2 percent less than it was a year ago. But this assumption is not necessarily correct. Because while the median price is a decent measure of how much the typical buyer paid, it does not tell us what that typical buyer got for the money.
When it comes to measuring actual changes in home market values, the median price can be thrown off by the following: