Median Home Price - This is undoubtedly the most common method used to measure changes in the real estate market. One of the reasons for this method's popularity is because it is easy. Every good Multiple Listing Service (MLS) software program does this easily and displays it automatically with any real estate search.

The drawback of this method is that it does not measure changes in property values. Instead, it measures what buyers are willing to pay. The result is that median homes prices may be going up while actual property values are declining. This may seem somewhat contradictory at first glance. However, think of it this way, when the median home price is increasing and property values are declining, it just means that buyers are getting more for their money. As you can see on our Median Home Price chart, median home prices were relativey stable for a two and a half year period beginning in February of 2009 while the Yuba City Market Value Index was showing a slight but steady decline. In February of 2009, a buyer purchasing the median priced home (about $158,000) could get a home under 20 years old with about 1,300 to 1,400 square feet of living area. In July of 2011, a buyer purchasing the median priced home (about $150,000) could get a similar home with about 1,600 square feet of living area.

Paired Sales Analysis - This involves searching for homes that have sold twice and measuring the difference in time and price. For instance, the home at 1583 Portola Valley sold on January 19, 2004 for $220,000. It then sold again on July 16, 2004 for $259,900. The $39,900 increase in six months represents an appreciation of 18% for an annualized rate of 36%. If you get enough of these sales it gives you a pretty good indication of how fast the market is changing.

There are some problems with using paired sales analysis. If the first sale was of a home sold as a fixer upper and the second was of the home after it was fixed up, then you don't know how much of the increase was due to changes in the market and how much was due to changes in the condition of the property.

Another problem with paired sales analysis is that you don't always know if there was distress involved in either sale. For instance, was the first sale to an investor who simply recognized an exceptional value and then resold it for a profit? Or, quite often, a second sale in a short period of time is the result of some distress on the part of the owner so the second sale may have been at below market value.

A good paired sales analysis needs to look at the individaul sales to determine if there were significant changes in condition between the two sales or if either sale was a distress sale. Both of these situations would cause you to exclude these sales from the anyalysis.