The median sale price measures the “middle” price of homes that sold, meaning that half of the homes sold for a higher price and half sold for less. While this is a good measure of the typical sale price, it is not very useful for measuring home price appreciation because it is affected by the “composition” of homes that have sold.
For example, if more lower-priced homes have sold recently, the median sale price would decline (because the “middle” home is now a lower-priced home), even if the value of each individual home is rising.
Home price indexes attempt to address this using statistical techniques to provide a “constant quality” measure of home price appreciation. Although they give no information about the typical selling price of a home, they provide a better measure of home price appreciation than does the median sale price.