The median price per square foot for resale homes dropped again in March. The 1.3 percent decline experienced by single family homes was more mild than in recent months — perhaps what we’d expect during spring, typically a strong season for housing prices. The size-adjusted median price for condos, on the other hand, continued its rapid descent by falling 4.1 percent for the month.

From a year ago, this price measure has fallen 27.1 percent for single family homes, 39.2 percent for condos, and 30.7 percent for a volume-weighted aggregate of the two. From the peak of the series in September 2005, it has fallen 46.0 percent for single family homes, 56.4 percent for condos, and 49.3 percent in aggregate. The decline from the peak is shown in the accompanying graph.

As always, bear in mind that this metric quantifies how much buyers are paying, not what they are getting in return. (Well, it quantifies how many square feet they are getting in return, but bang-for-the-buck comes in many forms besides home size).

So the median-based price indicators are inherently subject to distortion. We saw it in early 2007, when low-priced home sales volume dropped off a cliff as subprime lending disappeared. As a result, both the size-adjusted and “plain vanilla” medians overstated actual price strength during that period.

Conversely, we are seeing it now as volume comes roaring back in the low-priced areas but remains sluggish in high-end areas. So the median-based indicators are almost certainly overstating the price decline over the past several months. It’s just hard to know by how much.

This is why I pay so much attention to the Case-Shiller price index, which is a lot more accurate because it’s based on subsequent sales of individual single family homes. Comparing the Case-Shiller index to the single family size-adjusted median can give us an idea of how far off the latter may be.

The January release of the Case-Shiller index (which best represents December pricing because it is based on an average of the prior three months) was down 40.8 percent from its peak. The December size-adjusted median for single family homes was down 42.7 percent. So the size-adjusted median had indeed overstated the decline from the peak, but it had done so by less than 2 percent.

Feel free to adjust this latest month’s data accordingly. And if you’re still awake at this point, you may be interested in a longer piece I once wrote about the difficulties of measuring aggregate home prices.


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