Housing statistics, such as price - are often stated as either "average" or "median".  So what's the difference and what does it all mean?

The word median, is a statistical measure and it is based on a "normal" bell curve (like the one above).  By definition, it means the middle of the distribution - half of the distribution is below the median and half is above.  In a perfect bell curve, the average and the median are the same.  But in the real world, most things are not perfect.

In the case of housing prices, it is quite common to have a somewhat skewed distribution.  This causes the average and the median to be different.  The example below shows the number of homes listed for sale in each of the price ranges:


This curve is certainly not a nice clean bell curve like the previous one.  There are several price ranges that are empty - zero homes, while others have a large number of homes in them. 

The average home price in this example is $314,608 but the median is $259,900.  The median is less sensitive to the extremes - like the small number of homes in the price ranges above $550,000 and the empty ranges.  In this case, there are 61 homes in the price range between $200K and $250K which is where the peak of this curve occurs.  The median is closer to the peak than the average - it occurs in the $250,000 to $300,000 price range.

The average is skewed by the fact that there is not a nice normal distribution of homes in all of the price ranges.  The average falls in the range between $300,000 and $350,000 - in this range, there are only 30 homes.

So the median compensates for the amount of "skew" in the data.  Some people like to say that the median and a weighted average are the same thing.  Technically, that is incorrect, but the concept is similar.

Actual housing statistics were used to create the graph above.  Based on information from the REGIONAL MULTIPLE LISTING SERVICE OF MINNESOTA, INC for the period of Aug 28, 2007 through Aug 31, 2007.

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Patti Ann Kasper, Your Minnesota, North Metro Twin Cities, and Blaine MN Real Estate Expert!  Associates of Science Degree in Geographic Information Systems and Cartography from Anoka Ramsey Community College in Coon Rapids, Minnesota.
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