Most homeowners will attempt to gain as much information on the real estate market as possible, just in case they are forced to sell their home someday. Therefore, these homeowners will want to understand exactly what is happening in the housing market in their area. They will keep an eye on whether prices are going up and when the best time to sell is because this is an investment that can be cashed in at any time. Within this information, however, are a great deal of industry related terms that the average person may not understand. In order to help, here are the definitions of some of these confusing terms:
Median price. This is an indication of how strong the housing market currently is and what direction it is headed in, as it is the midpoint of all of the houses that have been sold in a particular area during a particular time period. This is a little different than an average, as it is impacted by not only the number of homes sold and their prices, but also of the characteristics that these homes have. For example if more mansions are being sold that one bedroom starter homes, then the median price will go up because these homes will be costing more money, even though the actual market may not be increasing. Therefore, it is important to keep an eye on the variables that go into a median price, rather than simply watching the numbers involved.
Seasonally adjusted. As a rule, remember that the housing markets are busier in the spring and summer because these are the times that people would prefer to move. No one wants to move during the cold winter months because it can be draining and the days are much shorter. Also, many people want to move while their children are not in school, which explains why certain months are busier than others are. Because of this, it can be difficult to come up with market comparisons over the course of the year, so economists have come up with a formula to adjust the number to give a more accurate representation of the housing market. This is called seasonally adjusted and it prevents people from thinking that the market is taking off in the summer, as this is a trend that naturally occurs every year because of sources outside of the actual housing market.
Price discount. This is the difference percentage wise between the asking price and the actual price that a home is sold for. This occurs when an offer that is below the asking price is accepted by the buyer and these price discounts are reported as an average over a set amount of transactions. When the percentage is low, it is a seller's market, while a high number will show that it is a buyer's market currently. Unsold inventory index. This is an index that tells how long it would take for all of the homes that are currently on the market to be sold using the current speed of sales. The smaller the number of the index means that sellers are doing well, while a higher number means that the buyer will be able to ask for a lower price on most houses.
Affordability index. This represents whether or not the average family in an area can afford to buy an average home. The average family is defined by whatever the median income in the area is and the average home is defined by the median price in the area. This index is based on the number 100, where if the number is right at 100, then the average family has exactly enough money to afford this. If the number of more than 100, then the average family has more than enough money, while a number under 100 signals that the average family cannot afford this.