The median price for a home in the US fell to $169,000 in the first quarter, according to a report released by the National Association of Realtors. The number represents a 14% drop from a year earlier. Median prices in metropolitan areas ranged from a low of $30,300 in Saginaw, MI to 570,000 in Honolulu, HI. The median price has been pulled down due to a number of factors including the surge of first-time homebuyers into the market and the large number of foreclosures being sold.
While it is very tempting to see these statistics as quite negative, they also come with some positives. Yes, it is disconcerting to see the value of homes decline. Yesterday we discussed the large number of people who are underwater on their mortgages, and declining home values will only serve to exacerbate the problem. However, the influx of new buyers into the market is a positive sign for the industry. New buyers will likely remain in the market, turning people who used to rent into prospective buyers and sellers. The ultimate increase of prospective buyers should increase the demand within the market, leading to a stronger market in the long run.