Recent headlines are creating confusion by reporting a drop in the median asking price of homes. Buyers and sellers may assume that means home values are falling, but the numbers don’t tell the whole story. In reality, home values are rising nationally, driven by a changing mix of properties on the market.  

The key reason for the drop in median price is that many of the homes being sold today are smaller, less expensive units. The median price simply reflects the midpoint of all homes listed—not the value of any individual property. Much like lining up coins from low to high, the median falls based on what’s available, not on a shift in actual value.  

Danielle Hale, Chief Economist at Realtor.com, points out that “the share of inventory of smaller and more affordable homes has grown, which helps hold down the median price even as per-square-foot prices grow further.” This shift explains why the median price has fallen, despite rising home values.  

Price Per Square Foot: A Better Indicator of Value  

A more accurate way to gauge home values is by tracking the price per square foot, which accounts for the amount of space being purchased. This metric shows that the value of homes continues to climb, even as the median asking price has dropped.  

Ralph McLaughlin, Senior Economist at Realtor.com, reinforces this point: “When a change in the mix of inventory toward smaller homes is accounted for, the typical home listed this year has increased in asking price compared with last year.”  

Data from the Federal Housing Finance Agency (FHFA) confirms this trend, noting, “Nationally, the U.S. housing market has experienced positive annual appreciation each quarter since 2012.”  

The median asking price overlooks variations in home sizes, meaning it may not accurately represent true market value. However, recent national data on price per square foot confirms that home values continue to rise, even as the median asking price has declined, as the graph shows.

Conclusion
Don’t let headlines about falling median prices mislead you. The decline reflects a larger share of smaller homes in the market, not a decrease in home values. The rise in price per square foot shows that the housing market remains strong, with home values continuing to appreciate.