A price index is designed to measure change. A price level describes an amount. The distinction sounds elementary, but it is one of the easiest ways to misread housing data.
An index may control for composition, property characteristics or repeat sales so that the series better reflects market movement. A median transaction price describes the middle observed transaction in a period. An average price aggregates observed amounts and can move when the mix of properties sold changes. None of these is automatically a substitute for the others.
What an index can tell you
If an official residential price index rises from 100 to 106, the useful information is the relative movement under that index's methodology. The level “106” is not a currency price. Rebasing two indices to the same starting value can make trajectories easier to inspect, but it does not make their underlying property universes or methods equivalent.
What a transaction price can tell you
A median or average price is anchored to observed transactions and expressed in currency. That makes it intuitive, but transaction composition matters. If a period contains more high-end units, larger homes or transactions from a more expensive submarket, the aggregate price can rise even when like-for-like property values are stable.
The reverse can also occur. A shift toward smaller or lower-priced properties can pull an aggregate price down without demonstrating an equivalent fall in each property's market value.
Why cross-market comparison becomes difficult
One jurisdiction may publish a repeat-sales index, another an appraisal-based index, another median registered prices, and another average transacted prices by unit class. Putting those values in adjacent columns does not produce equivalence.
Questions to ask
- Is this an index, median, mean, appraisal or transaction amount?
- Does the series adjust for property mix?
- What housing segment is included?
- Is the geography stable through time?
- Are the compared series measuring the same concept?
A useful interface does not need to eliminate these differences. It needs to keep them visible.