The median is not the message
A bit of a play on the famous words of Marshall McLuhan who said, "The medium is the message"; in real estate, the median is not necessarily the message that Case-Shiller and others tracking home prices are making it out to be.
Here's why. You can't buy a median price home. The median is the middle point of all numbers is a series. An example:
5, 10, 15, 25, 30, 50, 100 5, 7, 8, 15, 25, 75, 100
median 25, average 33.57 median 15, average 33.57
You can clearly see that the median is significantly lower in the second set of numbers than it is in the first series and yet the average remains the same. So what's going on.
A decline in median home prices reflects the mix of homes being sold at a particular point in time. When you look at the sharp price declines reflected in the Case-Shiller index in cities like Las Vegas, Phoenix and some of the other previously overheated housing markets, my best educated guess is that a high percentage of the homes being sold are foreclosures because those same markets are the markets that RealtyTrac reports have the highest number of foreclosures.
Foreclosed homes are being sold by banks at very attractive prices that are much lower than market in an effort to get them off the books and turn those assets into cash. Those sales may exaggerate the price declines.
While the Charleston real estate market certainly includes some foreclosures, the percentage of the foreclosed homes being sold in the Charleston area is only a small percentage of total sales and therefore, price declines in the Charleston area have been far more moderate.
So the median price may not be the most accurate message to gauge the housing market.