Looking at the average price and median price charts over the last few months, you might get the impression that house prices are flat. This seems odd given that so many homes are going for more than the asking price. The secret to solving this riddle is to look at the average square foot chart:
Here we see the average size of a closed home dropping from 2,046 to 1,952 between mid-May and late September. Not only is this going to cause a 5% headwind to average prices, it also signifies a change in the mix away from high-end and towards the low and mid-range. This will push the average and median for closed homes downwards.
We do not expect the drop in average home size to be maintained. After all, homes are not shrinking in size. Average and median prices are likely to bounce back once the high end buyers return, when temperatures drop below 100 degrees.
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Today's Daily Observation mirrors the same point we've made recently - that the appearance of flat home prices simply masks the higher price per square foot.
As we welcome cooler mornings, the Daily Observations prediction of a 'bounce back' in average home size will be easy enough to track in the not so distant future!
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