Average or Median? Where do you focus?
When determining market value, looking at the median sale price is considered by many to be a better indicator than the average sale price because the median is not affected by outliners (an unusually low or high sale price)
Neither statistic is more accurate, but both have a best place to be applied when analyzing data.
As we know, the "average" (also referred to as the mean) is calculated by adding a list of numbers and dividing the sum by the number of numbers in the list.
The "median" is when your take your list of numbers and then put them in order high to low and then choose the number in the middle. When applied to sales price of homes, 50% sold above and 50% sold below, sometimes referred to as the "balance point".
In the past, I have typically put more of my focus on the "average", but in the current market, the data can be skewed by an unusually low sale due to a REO (foreclosure) or distressed property in the mix. I now find myself relying more on the median value, which does not change with an extremely low or high sale.
I maintain several spreadsheets that I use to analyze our local real estate market. One spreadsheet I keep updated lists the "average" sales price of Lewis County Residencial homes. This calculates the annual percent of change in value from year to year.
I now update it to show both the average and the median from month to month. This backs up my data and gives me a confident range.
House Photo Credit to renjith krishnan http://www.freedigitalphotos.net/images/view_photog.php?photogid=721">Image
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