Actual Appreciation VS. Median Home Price

Filed under: Market Comentary

Today I want to talk about what is going on with the housing market and current housing prices. If you’ve been paying attention, you can see that the real estate market is still on fire.

Last week, we got year-over-year median home price increase data. The information showed almost a 24% increase this year compared to last year nationally. We also looked at the FHFA housing price index, which is a better gauge of appreciation – that showed a 15.7% increase this year. This number is accelerating (it was about a 14% increase the month before).

The Difference Between Appreciation and Median Home Price

Things are continuing to go up quickly. But what’s the difference between the two reports?

One measures appreciation, while the other measures the median home price. This highlights the weakness of the median home price measurement. This data means that exactly half the houses that sold were above that number, and the other half were below that number.

When you dig into the first number (a 24% increase in median home prices), there are a few interesting things to note. The million-plus end of the housing market is on fire. It’s disproportionately growing compared to previous years. $2 million and more is up over 200% vs. the same period last year.

If a bunch of higher-end houses sell, then it pulls up the median home price quite a bit. Real appreciation is still in the 15% range – which is insane! Anything in the middle or upper single-digits is a historical norm.

I wanted to compare these statistics so you can understand the difference between the median and average indicators. Just because the news headlines are talking about a 24% median increase, it doesn’t mean that the value of your house increased by 24% in the last year.

How the Fed is Contributing to the Market Trends

One other notable headline is that the Fed is taking note on how hot the real estate market is. They are buying mortgage-backed securities and treasuries – over $100 billion per month to keep interest rates low and mortgage rates low in a market that is out of control. It will be interesting to see if they start to come off the throttle in buying the mortgage-backed securities to allow the market to balance out.

If you have questions, I’m always here to help. Reach out if you need information about your mortgage or refinance.

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