Speaking of Statistics...What's the Difference Between Median Price and Average Price?

Ever been confused by media reports of housing prices  and the cost of home-ownership? The media usually report median or average prices without really explaining what that means.  The news is always talkng about how housing is becoming less and less affordable and that the median price is climbing up like crazy everywhere. But what is a median price, why look at it and how it's different from average price?

Well the median home price is one of the most common measurements used to compare Real Estate prices in different markets, areas, and periods. It is said to be less biased than the mean (average) price since it is not as heavily influenced by a small number of very highly priced homes. A median is the price where 'half the homes sold for more and half sold for less.'

The median price  however doesn't give any indication of the spread of these prices. Many properties are sold at much lower - and higher prices, of course - than the median price. Clear as mud eh? 

Suppose we take 7 houses that were sold and sort their prices from lowest to highest (in thousands )

                                            250, 252, 278, 286, 302, 325, 339

Median price here is 286, because it's in the middle of range - 3 prices are lower and 3 prices are higher than it.

The average price  - Is where an average price is - the total dollar volume of homes sold for a particular period, divided by the number of properties sold.

Average prices are typically reported for the sales activity in a given area for a given month, quarter or year, and provide a snapshot of past activity.

To calculate average price we have to add up all of the prices and then divide by the number of houses, so that:

                    Average price = (250 + 252 + 278 + 286 + 302 + 325 + 339) / 7 = 290

However, average prices of properties sold in the past give only a limited indication of what housing inventory for sale is priced at today. What this shows basically is  who rules the market in a certain place (suburb or area) at certain time (i.e. 3 or 6 months or a year): if there are more people buying expensive houses than cheap ones, it will go up, but if there are more people buying cheap property than expensive - it will go up. 

You sort of have to know what housing is doing in a particular community to put these average prices into perspective.

So there you go!

Also see:   

How Do I Find a Good Realtor? 

Is It Wrong to Work With More Then One Realtor?

Don't Have a Site Survey - Title Insurance - Should You Get It?

If you or someone you know is thinking of Buying or Selling property in Cultus Lake, Chilliwack, Hope, Abbotsford, Langley or anywhere in the Fraser Valley Area of B.C. - or if you would like more information please give Liz  Moras of Landmark Realty Chilliwack a call at- 604-799-0459 or e-mail at lizmoras@gmail.com.