Median Versus Average – Who Wins??!

averageThe median price of home is going down… The average home price is going up… What’s going on here?

When reading the bold newspaper headline declaring that the “Median home price is down again”, most people interpret this as bad news.

Is there a difference in Median or Average for the housing industry? Yes!

Median price = 50% above and below the middle price point.

Average price = All home sales added together and divided by the number of sales.

In our local market, the median sale price of homes is going down. Why, because homes in the more affordable price range have the biggest turnover (sell faster) and homes on the upper end (that tend to increase the average price) are selling more slowly.

Also, there are fewer upper end homes. So, when they do sell, the average goes up fast! The actual number of homes in an upper tier ($1,000,000+) may be 10% to 15%; one sale at $1,500,000 moves the AVERAGE up pretty quick.

In light of these numbers and formulas, every property must be examined within their own micro market and with multiple objective data points (trends and hard sales figures), to paint an accurate picture of market value.

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