Median Price Vs. Average Price…and the winner is?

February 13, 2015
Author:
Josh Call

Median Price Vs. Average Price

Often times in real estate statistics, we refer to median price and average price. So which is better?

To arrive at the average price, one would take the sum of the values and divide it by the number of prices being analyzed. This would give you the average.

Median price would be the number where half the numbers are lower and half the numbers are higher. In Real Estate, that means the median is the price where half the homes sold that month were less expensive and half were more expensive.

Below are 2 examples of fictitious real estate sales. Median Vs. Average

Example 1
1. 100,000
2. 102,000
3. 103,000
4. 105,000
5. 108,000
6. 109,000
7. 113,000
8. 113,000

Average price = $106,625
Median price = $106,500
note: because the median would be between 4 & 5, add 105,000 + 108,000 / 2 = $106,500

As seen above, these 2 numbers came in very close from each other, but that’s not always the case.

Example 2

1. 100,000
2. 103,000
3. 107,000
4, 108,000
5. 109,000
6. 110,000
7. 510,000

Average price = $163,857
Median price = $108,000

The clear winner of this would be the median price in most all circumstances. When analyzing data within a neighborhood, zip code, or city, we are able to capture a fair amount of data. Average price can be skewed high by a handful of very high-dollar transactions while median will remain more consistent.

When looking at statistics and market reports, keep an eye out for Median over Average.

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