Median Home Price Just One Indicator of Market Strength in Bend

medianHow important is median price when it comes to determining the value of your home?  The answer is:  Not at all.  It is a good indicator of what is happening in the real estate market as a whole but not for your house specifically.  For most people a short article in the Bend Bulletin about how the median price of homes sold rose 15% in March would be cause for celebration.  I’m sure there were a number of people running around their houses this morning saying, “Honey, the price of our house went up 15% last month!!”  The problem is, we tend to think of median price as the average price when more often than not it is anything but average.

Median price is just the middle price of however many homes have sold.  If 100 homes sold in a given period with prices ranging from $150,000 to $850,000 the median price would not be $500,000.  This is a bit of oversimplification but to determine the median put the price of each home that sold on a line going from lowest to highest.  Draw a line in the middle so there are 50 numbers on each side of the line.  The number that falls in the middle where they were divided is the median.  So if the median price is $271,000 it would mean that half of the homes sold for less than that amount and the other half sold for more.

It just so happens that $271,000 was the median price of homes sold in Bend during the month of March (2013).  While the aforementioned one month improvement of 15%  is quite a gain it would be unwise to assume that all homes in Bend gained that much value.  There are a few factors that make median home price a less than reliable or accurate indicator in today’s real estate market.

One of those factors is inventory which has been an issue in Bend and Central Oregon for more than a year.  Low inventory keeps the number of sales lower than they would otherwise be.  When the number of sales in a real estate market is low, the median price tends to be less reliable because it can go up or down very quickly with just a few sales.

The kind of homes that are selling also plays a role in determining median home price.  Bend is unique in that there are a wide range of homes to meet the needs of many different kinds of home owners.  We see people buying homes not just to live in but as investments (rentals), second homes, future retirement homes and vacation homes.  Vacation and second home owners make up a larger percentage of owners here than in most markets and they aren’t necessarily interested in the same kinds of homes as those who live here full time.

Another thing to keep in mind where median price is concerned is the sample.  In other words, is the median price based on sales for the whole county, the city or just a neighborhood?  While the house you own or are thinking about buying may be located in Deschutes County and Bend, Oregon the neighborhood where you live will have a much smaller sample.  Therefore things like how recently the homes were built, the school district, distance to restaurants and shopping and overall desirability will play a larger role in determining median price.

If your goal is to figure out what the value of your home might be, median price is not the place to start.  It can help us understand the real estate market as a whole but a Current Market Analysis from your favorite real estate agent will provide a much more accurate valuation.  The sales used by your agent will be from homes that are similar in size, year built, improvements and are close in proximity to your home.  Sales used to determine median price are all inclusive meaning median price doesn’t discriminate between young and old, mountain views or train tracks.  You might be surprised by the value of your home like some clients were today when they found out their home was worth $200,000 instead of the $160,000 they thought it could sell for.  Call us today at (541) 508-2930.

About Dan Seim

Dan Seim is the primary contributor to Preferred Residential's blog. He has been writing about real estate issues that affect home owners in Bend and Central Oregon since 2011.