Published in: Research | Aug. 4, 2020
By: Amy Fontinelle
Average house prices are high nationwide.
Because inventory is historically low, and so are the rates on mortgage loans.
According to the National Association of Realtors®, there were 18.2% fewer homes available for purchase in June 2020 than the year before. This has pushed house prices up, in spite of the recession and impact of COVID-19. The median price of an existing home was $295,300 in June, up 3.5% from 2019.
But people still want to buy homes. Here's what they might pay in each state.
The median U.S. existing house price for all home types (single-family, townhomes, condominiums, and co-ops) was $284,600 in May 2020 according to the National Association of REALTORS® (NAR). The median sale price for existing homes increased to $295,300 in June.
Editor's note: throughout this article, we're using the median home value as our average measure. For more details on why we chose the median instead of the mean, and where we got this information, see the extended discussion at the end of the article. When discussing the mean, we'll make a note to point it out.
St. Louis Federal Reserve Bank data shows a steady increase in U.S. house values from January 1, 1963, through December 31, 2017, with the exception of the serious dip caused by the housing crisis in the late 2000s.
The median sales price has declined a bit less since its peak in 2017; it was at $313,200 as of April 1, the most recent data available from the St. Louis Fed.
Inflation is one reason for the steady increase. If you bought an item for $10 back in 1963, that same item would cost about $85 dollars today. Along similar lines, if we adjust the median sales price of $17,800 from back in 1963 for inflation, by 2017, it would come to $142,586.
But the median sales price by the time we hit that high in 2017 was $337,900 -- $195,314 more than inflation. So what else is driving prices up?
One big factor is that houses have gotten bigger.
Figures from the U.S. Census Bureau show that a median home in January 1973 was 1,525 square feet. By January 2010 it had reached 2,169 square feet. That's about 40% bigger.
For the sake of comparison, let's adjust the 1973 figure for inflation and calculate the price per square foot -- there's only a $6 difference.
|Home purchase date||Median U.S. home value||Median U.S. home value adjusted for inflation (2010)||Median home size||Adjusted price per square foot|
|Jan. 1, 1973||$30,200||$148,317||1,525 sq. ft.||$97|
|Jan. 1, 2010||$222,900||$222,900||2,169 sq. ft.||$103|
Other components that affect home prices include mortgage rates, economic recessions, and local market conditions. Many factors influence the housing market simultaneously, making it difficult to attribute price changes to a single cause.
The coronavirus pandemic has had an impact on almost every aspect of our lives, including the housing market.
The process of showing, buying, and selling homes slowed because of health concerns, economic fears, and the stay-at-home orders implemented in mid-March. In addition, many would-be homebuyers lost their incomes as the country experienced record-high unemployment rates.
Virtual showings increased, and real estate agents and homeowners learned safer ways to visit homes, including mask-wearing, physical distancing, and fresh air circulation. Some properties even changed hands without an in-person viewing.
Existing home sales fell 17.8% in April and 9.7% in May, then started to pick up in June. June sales climbed 20.7% from 3.91 million in May to 4.72 million. However, the figure is still 11.3% lower than it was a year ago.
|Existing home sales||March||April||May||June|
|2020||5.21 million||4.33 million||3.91 million||4.72 million|
|2019||5.27 million||5.23 million||5.33 million||5.32 million|
Low inventory and lower-than-usual sales volume have driven prices up: June's median existing-home price of $295,300 is 3.5% higher than the year before.
According to the NAR, the total housing inventory at the end of June was 1.57 million units -- 18.2% lower than in June 2019.
|Median home price||March||April||May||June|
The Federal Reserve slashed interest rates to help the economy, which pushed mortgage rates down to new lows.
Buyers able to qualify for these mortgage rates have faced increased competition for houses, with many entering bidding wars for the property they desired.
A number of homeowners who were planning to sell were still prepared to do so as soon as the stay-at-home orders ended. Some never even took their homes off the market, especially in rural areas less affected by the pandemic.
Here are the average home values for each state.
Zillow -- the source of this data -- divides homes into three tiers: the top tier for the most expensive third, the bottom tier for the least expensive third, and the middle tier for the rest. We've included all three, as well as condo prices, to give you an idea of the variation you might see in each state.
We'll start with the most affordable states to buy a house in.
West Virginia has the country's lowest median home values. This state also has the smallest difference between bottom-tier and top-tier home values. Homeowners in this state can get a lot of home for their money and pay low property taxes, too.
Here's what Matt Frankel, CFP and The Ascent's mortgage analyst, has to say about the housing market in West Virginia:
"Now could be a great time for West Virginians to become homeowners. Not only are mortgage rates at all-time lows, but at just $107,064, median home values in West Virginia are lower than any other state in the U.S. In addition, West Virginia has one of the lowest real estate property tax rates in the United States, helping to make home ownership cheaper all around.
Just to put some numbers behind how affordable home ownership can be in West Virginia, consider that the mortgage payment (including taxes and insurance) on the average West Virginia home would be just over $500 per month, assuming a 20% down payment. And as many programs offer competitive interest rates and flexible down payments, this could be a great time to make the leap from renter to homeowner."
The median home value in the Charleston metro area is $96,433. That's more than $150,000 less than the national median.
Mississippi has the country's second-lowest median home values. But, it's one of the most affordable states for childcare and a great place to get a top-tier home for a reasonable price.
"The average mortgage rate on a 30-year fixed-rate loan is below 3%," says Frankel, "which is just about as low as it's ever been. With Mississippi home values among the lowest in the nation, now could be a great time for the state's renters to transition to homeownership."
"In addition to the low home prices you'll find in the state, Mississippi has one of the lowest property tax rates in the United States, with an average bill of just $813 per year. While low property taxes will continue, low mortgage rates won't last forever, so it could be a good idea to act soon if you're thinking of buying a home in Mississippi."
The median home value in the Jackson metro area is $144,198. According to the 2019 U.S. Census, 82% of Jackson's population is Black or African American and 27% are living in poverty. It has a declining population, while the suburban areas are growing.
Arkansas has the third least-expensive top-tier homes in the country. You can get a top-tier home in Arkansas for less than half the price of a median home in California.
Frankel points out that, "with a median home value of $131,837, Arkansas has some of the most affordable real estate in the U.S. Even in the highly populated areas, like Little Rock, prices are significantly lower than the national average. It's worth combining the low cost of buying a home with the current record-low mortgage rates of under 3% for a 30-year mortgage loan. We calculated that the average principal and interest payment in Arkansas with a 20% down payment is just $445."
"And even without a substantial down payment, the monthly cost of homeownership in Arkansas can be significantly cheaper than renting. The fact that Arkansas also has one of the lowest property tax rates in the United States doesn't hurt either."
The median home value in the Little Rock-North Little Rock-Conway metro area is similar, at $149,223.
"Oklahoma has one of the hottest housing markets in the United States, with prices rising by more than 5% over the past year alone. Despite this, and the fact that homeowners insurance in Oklahoma is higher than average, homeownership in Oklahoma can be very affordable, as the median home price is still among the lowest in the nation," says the CFP and mortgage analyst.
"If you've been thinking of buying your first home or moving, now could be a great time to act. Mortgages have never been cheaper, with the average 30-year fixed rate mortgage interest rate below 3%."
The median home value in the Oklahoma City metro area is $158,337. Oklahoma has the country's fourth-lowest median home values and its condos have the lowest. That means it could be a great state to step on the first rung of the home ownership ladder or to downsize in retirement.
Alabama's median home prices are far below the U.S. median. If you live in a pricier part of the country, the idea of buying an entry-level home for $68,371 or a top-tier home for $271,889 must sound like a fantasy.
Here's what Frankel says about this southern state: "Alabama home prices have risen by nearly 6% over the past year, making it one of the hottest markets in the United States. All the same, at $147,539, the median home price is still one of the lowest in the nation. Combine that with an average 30-year mortgage rate that's below 3% for the first time in history, and now could be the right time to shop for a home in the state."
"In addition to having the fifth-lowest home prices in the state, Alabama also has the lowest property tax rate in the continental U.S. So, in addition to the cheap mortgage payment resulting from low home prices and mortgage rates, the average Alabama homeowner gets a property tax bill of just $543 per year, which would sound like an absolute fantasy to homeowners in many other parts of the country."
In contrast, the median home value in the Birmingham-Hoover metro area is $159,680.
Why are home values so much higher in the broader area? Many factors are likely at play, including the age and size of homes. But this stark difference is also an example of the damage done by the government practice of redlining over 80 years ago.
Back in the 1930s and 1940s, the mortgage industry coded most of the city of Birmingham as "hazardous" (redlined) or "definitely declining" (yellow lined) to reflect the perceived risk of extending home loans in these areas. That made it difficult to access home loans, which in turn meant made it challenging to buy in these areas.
The effects of these historical lending practices tied to race, ethnicity, and socioeconomic status can be seen to this day in the stark differences between home values in redlined ($62,000) vs. greenlined ($931,000) neighborhoods. (Values calculated by Zillow.)
Kentucky has the smallest difference in median home value and median condo value of any state.
"Kentucky is one of the most affordable places to buy a home in the United States with a median home value of just under $151,000," says Frankel, "even though home values have risen significantly over the past few years. When you consider that mortgages have never been cheaper, now could be the ideal time for Kentucky residents to buy their first home or upgrade their living situation."
"Even in the Louisville metro area, home prices are significantly lower than the U.S. average. And Kentucky has a property tax rate that's on the lower end of the spectrum as well. While Kentucky's market might remain affordable for some time, the record-low mortgage rates aren't likely to last forever."
The median home value in the Louisville/Jefferson County metro area is $182,754. One of the priciest homes on the market right now is a 14,000 square foot mansion on a five-acre lot for a mere $3.3 million. The Greater Louisville Association of Realtors® reported 1,804 houses sold in June 2020 and a median sale price of $212,000.
The median condo in Kansas comes in at more than $50,000 higher than in neighboring Oklahoma. Even so, it's still one of the least expensive condo values in the country.
"The elevated risk of tornado damage means homeowners insurance costs in Kansas are among the highest in the U.S. Its effective property tax rate is also slightly above-average."
"Even so," continues our analyst, "Kansas is a very affordable place to buy a home. Its median home price of $154,531 is among the lowest in the United States, and the record-low mortgage rates of under 3% on the average 30-year loan can make the monthly cost of ownership significantly cheaper than renting."
The median home value in the Wichita metro area is $145,644. The Realtors® of South Central Kansas reported a median sale price of $172,700 in June, up from $165,000 a year earlier. Because inventory is low, with a supply of just 1.5 months of homes, the median time to sell a home was six days and sellers got 100% of their list price.
"Not only is Iowa one of the most affordable places to buy a home, with a median home value of $155,781, it can also be a great place to live and work -- especially in its cities. Des Moines actually has a median home value that's less than the state average and is one of the top-ranked cities in the U.S. for its combination of high salaries and low costs of living."
Frankel goes on: "To be fair, Iowa has above-average property taxes, and prospective homebuyers should certainly take this into consideration. But you might be surprised at how affordable it can be to buy a home in Iowa right now, especially while the 30-year mortgage rate is below 3% for the first time in history. There's no telling how long financing will be so cheap, so if you're thinking about buying a home in Iowa, now could be the right time to do it."
The median home value in the Des Moines-West Des Moines metro area is $204,604.
Des Moines is one of the best places to live in the United States for high salaries and low costs of living. According to the Des Moines Association of Realtors®, sales volume in June 2020 was up by 8.8% from the year before and the median sale price was about the same at $225,000. And Realtor Magazine named Des Moines one of its top 10 markets for millennials during the pandemic because of home values, job opportunities, and a large existing population of this age group (31%).
The median home value in the Columbus metro area is $214,638. Columbus had 2,542 home sales in May, with an average sale price of $258,688, per Ohio Realtors®.
"The median home value in Ohio is $156,343, which makes it one of the cheaper places in the United States to buy a home. When you combine the relatively low cost of purchasing a home with mortgage rates that are as low as they've ever been, you might be surprised at how affordable it can be to become a homeowner in Ohio right now."
"Even if you can't come up with a large down payment," says our mortgage analyst, "your monthly cost of homeownership could be significantly cheaper than renting."
What does Frankel say about #10 on the list? "Not only is Indiana one of the 10 most affordable real estate markets in the United States by average home price, but property tax rates are significantly below the national average as well. Even home prices in the desirable Indianapolis metropolitan area are significantly below the U.S. average."
"When you combine the low home prices, low tax rates, and record low mortgage rates, you might be shocked at how affordable it can be to buy a home in Indiana. If you're thinking of making the jump from renter to homeowner, considering moving to another location within Indiana, or simply want to upgrade your living situation, now could be a smart time to take action."
The median home value in the Indianapolis-Carmel-Anderson metro area is $183,655. The area's priciest properties, listed at $2 million to $5 million, are large tracts of land. The median sale price for Indianapolis homes in June was $219,000, according to MIBOR, Central Indiana's Realtors® association.
The median home value in the Kansas City metro area is $207,289. In June, the median sale price for existing homes in Jackson County, where KC resides, was $206,265, an increase of nearly 11% over last year, according to the Kansas City Regional Association of Realtors®.
Louisiana gets a bad rap a lot of the time. For example, Louisiana has the most unaffordable rents in the country. We also found it to be the worst state to retire because of poor rankings for healthcare and well-being. But at least its median home value is well below the national average.
The median home value in the New Orleans-Metairie metro area is $206,335. The New Orleans Metropolitan Association of Realtors® reported an average sale price of $301,352 in the first full week of July.
The median home value in the Omaha-Council Bluffs metro area is $201,112. The median sold price for Omaha homes was $219,000 as of June 2020, according to Realtor.com.
The median home value in the Detroit-Warren-Dearborn metro area is $183,941. That's almost $150,000 more than the median home value in Detroit itself.
Like Birmingham, most neighborhoods in the city of Detroit were either redlined (rated as hazardous) or yellow lined (rated as definitely declining) in the 1930s and 1940s. In those areas, and even ones rated as still desirable, home values have fared poorly over time, while home values in the "best" areas had climbed to nearly $271,000 as of December 2017, about four times as much as the $63,000 value of homes in formerly redlined areas.
Nashville's median home has almost the same value as Newark's median home ($289,358) or Washington's bottom-tier home ($289,328). The median home value in the Nashville-Davidson-Murfreesboro-Franklin metro area is $283,591.
South Carolina's home values are a bit lower than North Carolina's, where the median is $210,766.
The median home value in the Charleston-North Charleston metro area is $275,294. Staircases lead up to front porches on many homes in this area -- a feature that's not just elegant but practical, since the area is subject to flooding from the nearby ocean and rivers.
Pennsylvania's median home value is about 20% less than the national median. The state has more underwater homeowners who owe more than their homes are worth, more delinquent homeowners, and a higher foreclosure rate than the national average. These factors could be among several contributing to lower home values in PA.
The median home value in the Philadelphia-Camden-Wilmington metro area is $252,280. Philadelphia is one of the country's most socially-conscious cities.
Illinois, like Nevada, is a state where the median home and the median condo have almost the same value.
The median home value in the Chicago-Naperville-Elgin metro area is $242,168. The median sale price in Chicago, one of the country's most socially-conscious cities according to our analysis, was $312,500 in May 2020, per the Chicago Association of Realtors®.
The median home value in the Milwaukee-Waukesha-West Allis metro area is $210,270. In the four-county Milwaukee metropolitan area in June, almost 60% of pending sales were for properties above $200,000 to Metro MLS. The median price for existing homes ($233,000) and the median price for new construction homes ($430,244) are both up about 6% from June 2019.
Georgia's median condo is slightly more expensive than its median single-family home. Overall, Georgia comes in 20th when ranking states from least to most valuable median homes.
The median home value in the Atlanta-Sandy Springs-Roswell metro area is $244,070. According to the Atlanta Realtors® Association, the median sale price in May 2020 was $291,000.
The median home value in the Charlotte-Concord-Gastonia metro area is $240,278. Charlotte's median list price right now is nearly $315,000, according to Realtor.com.
The southern Texas cities of McAllen and Harlingen are the two U.S. cities with the country's lowest cost of living. And housing costs in the cities, which are a 35-minute drive from each other, are almost half the national average.
The median home value in the Houston-The Woodlands-Sugar Land metro area is $218,952. Houston is one of the best places to live for high salaries and low costs of living thanks to oil-industry jobs, plenty of flat, open space to build homes, and lax zoning laws. Houston homeowners must be mindful of flood risks, though.
The state's median sale price hit $231,000 in June, the highest it's been since the New Mexico Association of Realtors® began tracking the data in 2008. Like many other parts of the country, New Mexico suffers from a housing shortage and low inventory is behind the high prices.
The median home value in the Albuquerque metro area is similar, at $214,432.
South Dakota not only has reasonably priced homes, but it's also the most affordable state for childcare, according to our recent study. This low-tax state is great for outdoor enthusiasts.
The median home value in the Sioux Falls metro area, known locally as the Sioux Empire, is $214,805.
If you can handle the winters, North Dakota is the best place to retire, according to our research, thanks to its affordability, access to quality healthcare, and overall sense of well-being.
The median home value in the Fargo metro area is $226,690.
Maine's median home has almost the same value as the nation's median home. The median sale price of a Maine home in May was $237,900, according to the Maine Association of Realtors®.
The median home value in the Portland-South Portland metro area is $325,590. Cumberland County, where Portland is located, had the highest median sale price in the state in the second quarter of 2020, at $340,000.
The single-family median sale price in May was $270,000, according to the Florida Association of Realtors® -- pretty close to Zillow's median home value.
The median home value in the Jacksonville metro area is $234,310. This area is located along the Atlantic Ocean in northeast Florida, making hurricanes a concern.
The median home value in the Cheyenne metro area is $293,821. The Cheyenne Board of Realtors® reported a year-to-date median sale price of $276,000 through June for single-family homes in Laramie County.
While the median home value in Connecticut isn't much higher than the national median of $248,857, the state ties with New York for having the second-most unaffordable rent in the country, after Louisiana.
The median home value in the Bridgeport-Stamford-Norwalk metro area is $414,820. Homes in Stamford are much pricier than those in Bridgeport, and Norwalk is in the middle.
Delaware's median home value is close to that of the country as a whole, with a difference of less than $12,000. One of its most expensive homes is the 7,800 square foot Shell House, built along the ocean for a member of the Du Pont family in 1920. It's currently listed at nearly $7 million.
The median home value in the Philadelphia-Camden-Wilmington metro area is $252,280.
Vermont is a great place to live for a high sense of well-being, according to a Gallup-Sharecare poll. Residents are more likely to enjoy a sense of purpose, supportive relationships, a sense of community, financial security, and good health.
The median home value in the Burlington-South Burlington metro area is $318,990. The Northwestern Vermont Board of Realtors® reported a median sale price of $325,000 for single-family homes in June and $264,000 for townhomes and condos. The number of homes for sale is down 36% compared to last June.
The median home value in the Minneapolis-St. Paul-Bloomington metro area is $297,586. The median sale price increased by 5.2% from June 2019 to June 2020, reaching $305,000, according to Minneapolis Area Realtors®.
Arizona is a great place to buy a home if you love sunshine but hate lawn care. Xeriscaping with rocks, succulents, and cacti is a popular way to decorate your yard here to conserve water in the hot, dry desert.
The median home value in the Phoenix-Mesa-Scottsdale metro area is $294,161. June home values are up 9.6% in Phoenix compared to last year, representing the biggest increase among the 50 biggest metro areas in the United States, according to Zillow.
This May, more than 9,000 homes sold in Montana, compared to about 8,400 in May 2019, according to the Montana Regional MLS. Home sales were even more robust in March (9,140) and April (9,147) this year.
The median home value in the Billings metro area is $264,941.
Virginia Realtors® reported a median sale price of $318,000 in June 2020. The state has far fewer active listings than it did last June: 23,558 compared with 38,887 the year before.
The median home value in the Virginia Beach-Norfolk-Newport News metro area is $245,690. The homes in Virginia Beach don't all look like beach houses, though: many have red brick, siding, and shutters.
The median home value in the Anchorage metro area is similar, at $313,914.
Homeowners in Alaska must protect their property against a risk that many of us don't associate with the northernmost state: earthquakes. Alaska is the most seismically active part of the country and experiences 11% of all recorded earthquakes in the world.
The median home value in the Boise City metro area is $324,254. The median sale price in June 2020 was $375,000, according to Boise Regional Realtors®.
New Hampshire's real estate market reflected what we are seeing in the rest of the country, as declining sales push up real estate prices. According to New Hampshire Realtors®, closed sales were down 12% compared to last June, and, at 50, the average days a property spends on the market was up 16%. But the median sale price of $330,000 is up almost 5%.
The median home value in the Manchester-Nashua metro area is $315,309. A popular style for Manchester homes is light-colored siding with dark-colored window shutters.
It's much easier to become a condo owner than a homeowner in Nevada, with the median condo valued at almost half the value of the median home -- one of the biggest differences in the country.
The median home value in the Las Vegas-Henderson-Paradise metro area stands out because, at $295,500, it's very similar to Las Vegas itself. In fact, it's one of the closest metro-big city home values in the country.
The Rhode Island Association of Realtors® reported a median sale price of $309,000 for single-family homes in June, while the median sale price for condos was $250,000.
The median home value in the Providence-Warwick metro area is $322,966.
The median home value in the Baltimore-Columbia-Towson metro area is $294,353.
As we saw in Birmingham, Alabama, redlining is part of the reason why homes in the city of Baltimore are valued at only half as much as those in the greater metro area. The typical home that was redlined in the 1930s and 1940s was only worth $100,000 in 2017.
On a number of other metrics, Baltimore earns great marks, making it the second-most socially-conscious city in the country.
It's not just homeowners who pay a lot to live in this area: New York ties with Connecticut for having the second-most unaffordable rent in the country.
New York also has the nation's biggest discrepancy between condo values and house values. Nowhere else will you find that a median condo costs $317,641 more than the median house.
The median home value in the New York-Newark-Jersey City metro area is a more moderate $485,812 since New York City prices have less of an impact when including data from a broader area.
The latest market statistics for New Jersey homes show that inventory and pending sales are down compared to a year ago, but the median sale price has increased steadily since 2017. As of May, it stood at $325,000 (up 6.2% from May 2019), according to New Jersey Realtors®.
The median home value in the New York-Newark-Jersey City metro area is $485,812, a difference of almost $200,000 over Newark. That's because the metro area encompasses New York City, which has a reputation for being super pricey.
In Essex County, where Newark is, June's median sale price for single-family homes was $520,000, according to the New Jersey Association of Realtors®. Condos were much less expensive, at $275,000.
The median home value in the Salt Lake City metro area is $386,845. According to the Utah Association of Realtors®, year-to-date closed sales through May in Salt Lake County were down 11% compared to the same period in 2019. The year-to-date median sale price is $363,100, which is 8.4% higher than the same time last year.
The median home value in the Portland-Vancouver-Hillsboro metro area is $424,513. Portland is the country's third-most socially-conscious city, according to a study we did earlier this year. Right now, the median list price is $490,000, according to Realtor.com.
Colorado has the fifth-highest median home values in the country. While it's a beautiful place to live, it also suffers from an affordable housing shortage, especially in Denver, where the population has been booming.
The median home value in the Denver-Aurora-Lakewood metro area is $444,722. This year, the average price of residential real estate in the Denver area has twice reached record highs above half a million dollars, according to the Denver Metro Association of Realtors®.
The median home value in the Seattle-Tacoma-Bellevue metro area is $544,451. That's the price you'll pay to live in one of the country's most socially-conscious cities and have access to some of the most scenic hikes in the country.
Massachusetts has the third-highest median home value in the country. That's great if you're already a homeowner, but less so if you want to buy. It's also one of the least-affordable states for childcare.
The median home value in the Boston-Cambridge-Newton metro area is $498,566. Boston has one of the highest overall costs of living in the country, and its housing prices are a big reason why.
Boston is an interesting case where formerly redlined homes are worth a ton today: $848,000 as of December 2017. As Zillow's redlining study points out, however, we shouldn't get too excited about results like these because they can be the result of gentrification, a process that displaces less-affluent residents.
A housing shortage is a driving factor in California's astronomical real estate prices. Consulting firm McKinsey estimates that the state needs to add 3.5 million homes by 2025 to help alleviate the shortage and make homes more affordable.
The median home value in the expansive Los Angeles-Long Beach-Anaheim metro area is $697,203.
Hawaii has the highest median home value in the country and the second-highest top-tier home value in the country, after California. It also has the country's most expensive bottom-tier and single-family home values. Condo values rank third, after New York and California.
The median home value in the urban Honolulu metro area is $695,375. Honolulu also has the nation's most expensive groceries. O'ahu is the busiest area for home sales, and the median single-family home sale price in June was $770,000, according to the Honolulu Board of Realtors®.
"The best mortgage rates typically go to borrowers with top-tier credit and at least 20% to put down," says Frankel.
"That's why two great ways to get the best deal on a mortgage are to improve your credit score and/or save up more money for a down payment. Whatever your qualifications, however, the smartest thing you can do is to shop around. Different mortgage lenders will offer you slightly different APRs, and you might be surprised at the long-term savings you'll get with a seemingly small difference in borrowing costs."
How much is a home worth? An economist might say it's worth as much as someone is willing to pay for it. But since many homes are off the market for years, even decades, how do we know what those homes are worth? A real estate agent or property tax assessor might say those homes are worth as much as similar homes are worth.
If you're thinking about buying or selling a home, you probably want to know what a typical home costs in that area. Where should you be shopping to stay in your price range? How much money could you make if you sell? But there are lots of different ways to measure home prices, which can be confusing, and each method has its pros and cons.
The mean home price is the figure most people think they want when they're wondering how much it costs to live in a certain area. The mean price won't provide the best answer to that question, though.
It's skewed by outliers, meaning that if an area has mostly three-bedroom and two-bedroom homes but a few mansions, those mansions will push up the mean price.
Conversely, the mean price could be dragged down if there's a part of town where the homes are older, smaller, and don't sell for as much as the typical home.
Median is a better way to evaluate how much a typical home is worth because homes with very high or very low values relative to the others in the area have a minimal effect on the median. That's why real estate organizations and government agencies tend to report on median prices, not average prices.
The next quandary is what we mean by "home price." It can be measured in several ways.
List price tells you how much a homeowner wants to get when they sell. Sometimes the list price is unrealistically high based on what the homeowner hopes to get. Sometimes the list price is actually far lower than what the owner wants because they hope to generate buzz and create a bidding war by listing the home below market value.
Median or mean sale prices are a better metric than list prices because they tell us what homebuyers were willing to pay. Sounds like the perfect measurement, right?
The problem is, some areas don't have enough recent sales to tell us the big picture of real estate values in that area. The area might have lots of long-time homeowners who are happy to stay put.
Or, the area might be rural and not have many homes, or the homes in an area might all be quite different from one other, unlike in a suburban housing tract where all the homes were built at the same time and many models are the same size and have the same quality. Median sale price might not represent the area's typical home price well in these cases because there is no typical home.
Another flaw with looking at median sale price is that if a certain type of home changes ownership more often than another type of home, prices could be skewed towards that type of home. If newer, larger, nicer homes tend to change hands more often than older, more modest homes, an area's median sale price will be a lot higher than its median home value.
Zillow has developed a sophisticated algorithm that tries to overcome the problems we've just described. Zillow estimates are not perfect, but they are more comprehensive than other methods. They aren't limited to data on recent home sales; they also include data that helps to value homes that haven't sold in years.
That's why we decided to use Zillow's Home Value Index, which is based on "the median Zestimate valuation for a given geographic area on a given day."
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