Investing Trends

Homeowners and would-be homeowners are always watching the housing market to try to understand what is going on at any given time. Is now a good time to sell? Is it better to buy in the winter or spring? How is the housing market this year? What is Median Price, and just what does it mean? Can you define "seasonally adjusted?" Newspaper articles and online searches may answer some of these questions, but understanding real estate terminology will make selling your home or searching for a new one much easier to understand.

In order to help you understand some of the real estate jargon, here are a few definitions for you to ponder.

Median price can be defined as the midpoint of all the prices of homes sold in a given area during a specified period of time. The median price is often a major indicator in the strength of the housing market. The midpoint means that half of the homes sold for less than that amount and half sold for more than the amount. Although it is normally a close indicator, the median is not the same as the average sales price. The average is figured by totaling all of the sales prices and dividing the sum by the number of homes sold. The median price can be easily affected by the types and sizes of homes sold as well as price trends. For example, if several larger homes are sold in an area in a short period of time, the median price could be higher than the normal median price. This could mean that the median price could go up even if homes do not appreciate in value.

Seasonally adjusted means that the numbers have been skewed slightly to accommodate the difference in housing markets during the different seasons of the year. As a general rule of thumb, the spring and summer months are busier times in the housing market. People tend to want to move between the school years when there is less disruption in the child's schedule and also warmer weather. To make the numbers look more realistic, the experts usually tweak the numbers during the slower months, coining the term "seasonally adjusted."

The price discount is the difference in the original asking price of the home and actual purchase price. For example, if a home is originally listed at $100,000, but sells for $96,000, the price discount is 4%. You will normally be able to find price discounts reported as an average for a set of home sale transactions. If the percentage is small, that is normally a sign of a sellers market while a larger number indicates the market is right for buyers.

The unsold inventory index is important to watch, especially when selling a home. This index indicates the pace of the market and is calculated by measuring how long it would take for all homes on the market to sell at the current rate of sales. The smaller index indicates a quicker selling time, and is beneficial for sellers. A larger index indicates that homes tend to sit longer on the market and could be beneficial to a buyer.

Being familiar with the basics of real estate terminology will help drastically when you are searching for a new home or contemplating selling your current home.