The third class carriages went off the rails first. Now the first class is going over. The bottom line is that a rise in median, or other average, prices isn't all good news.
Let's build a hypothetical population of houses and values. For convenience I'll make it a normal distribution.
2
4,4
6,6,6
8,8,8,8
10,10,10,10,10
12,12,12,12
14,14,14
16,16
18
So, the mean, median and mode are all 10. Let's say these represent hundreds of thousands of dollars. In normal times value and price should be pretty close to equal.
Now lets say that the market value, as distinguished from simple price, falls 50%. So now the value table would look like:
1
2,2
3,3,3
4,4,4,4
5,5,5,5,5
6,6,6,6
7,7,7
8,8
9
All the averages, from a valuation point of view, are just down 50%.
For fun, let's say that everybody lost their jobs. Logically the folks at the bottom will have less ability to hang on. So a market transaction index might have sales that look like, in, say, the first year:
1
2
3,3
4,4
5,5,5
6,6
7
Median would be 4.5, mode would be 5 and mean would be 51/12 = 4.25. Looks like "housing is down 55%", or even 57.5%.
Eventually, if things don't either improve or deteriorate further, the rest will go too.
2
3
4,4
5,5
6,6
7,7
8,8
9
Mean average is now 74/13 = 5.7, no mode and the median is 6. Prices rose. Hurray? Not really. They're still washouts losing 50% of their previous value. As the prices are higher, the total realized losses are too.
Heck of a way to run a railroad. Next time let's think about sale-resale indexes like Case Shiller.
http://www.charlesbwarren.com