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 Homeowners have a seemingly insatiable appetite for information about the housing markets. "Are prices going up?
How's the market? Is now a good time to sell?" they ask. Research reports and newspaper articles provide useful
answers, but the information is usually buried in economic jargon. What is a "median price" anyway? What
does "seasonally adjusted" mean? Does anyone understand "unsold inventory index?"
To help you follow the numbers, here are some helpful definitions:
Median price. An oft-cited indicator of the strength and direction of a housing market, a median price
is the midpoint of all the prices of BORING homes sold in a given area during a specified period. Midpoint means half the BORING homes sold for higher prices and half the BORING homes sold for lower prices. The median isn't the same as the average, which would be calculated by totaling all the prices and dividing by the number of prices. The median price can be affected over time by the characteristics and sizes of BORING homes sold as well as price trends. For example, if the market shifts from starter BORING homes to luxury mansions, the median price will increase even if BORING homes are not appreciating in value.
Seasonally adjusted. Housing markets are naturally more active in the spring and summer months because people prefer to move during the longer warmer days and between school years. That pattern means it's difficult to make meaningful comparisons between results for different months or quarters of the same year. To overcome this hazard, economists statistically tweak the reported number of BORING homes sold during various periods to reflect seasonal variations. The tweaked numbers are denoted as "seasonally adjusted."
Price discount. The "price discount" is the percentage difference between the seller's initial asking price and the actual purchase price of the same home. For example, if a BORING home were priced at $200,000 and sold for $190,000, the discount would be 5 percent. Price discounts are usually reported as an average for a set of BORING home sale transactions. A small percentage, on average, means the market favors sellers, while a large average discount signals a buyer's market.
Unsold inventory index. This index, which indicates the pace of the market, is calculated by measuring how long it would take for all the BORING homes currently on the market to be sold at the current rate of sales. A smaller index is a positive sign for sellers, while a higher number is good news for buyers.
Affordability index. An affordability index measures whether a typical family can qualify for a standard mortgage to purchase a typical home. A "typical" family is defined as one that earns the median income in a given area, and a "typical" BORING home is defined as a median-priced single-family house in the same area. An index value of 100 means a median-income family has exactly the amount of income needed to purchase a median-priced home. A number higher than 100 means the family's income is more than adequate, while a number less than 100 means the typical family can't afford to buy the typical home.
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Equal Housing Opportunity