A couple of months ago, I posted Info: Understanding Averages and Medians which explained the reasons for using median instead of average when looking at sale price and DOM.  It's also important to keep in mind that the median sale price can fluctuate due to changes in the mix of sales.  For example, the median home price here in Santa Clara County increased for several months during the summer, breaking records even as the number of transactions dipped and inventory swelled to record levels. 

Which numbers tell the real story?

I would argue that the number of transactions is the most important indicator of the health of any market.  The reason median home prices increased was because the sub-prime lending crisis had a disproportionate effect on the number of affordable home sales.  As a result, high end home sales made up a larger than usual percentage of completed transactions, distorting the median selling price.  This theory was proved by examining DOM for inventory at different price ranges.

We could also rely on common sense.  When a market is functioning properly, transactions occur.  When the number of transactions falls, it indicates a fundamental flaw in the market.  It's a good idea to remember this before using a median sale price distorted by the sub-prime crisis to try to tout a fundamentally flawed market.

Frank Jewett