News reports often quote sales statistics for the country, a state or even a metropolitan area. The most bandied about quantifier has to be the term ‘median’. But what does that really mean?
In real estate terms, it’s the mid-point in a set of numbers. So, if 101 homes sold in a given month, it would be a number signifying that 50 of the prices are lower and 50 of those prices are higher.
In contrast, average sales price is the sum of those 101 home sales prices, divided by 101.
Let’s look at a real time example. For the month of May in Livermore, CA, here’s how those numbers really play out. Looking at sales figures for single family homes sold between the dates of May 1st to 31st, 2011 85 homes sold. Here’s how the numbers play out:
Median Sold Average Sold
You can see that there is a significant difference between those two figures. Many other factors can be at play when evaluating statistics. A few good examples come to mind:
In September of ’07, high balance loans were exceptionally hard to come by, so very few homes over $1,000,000. Half as many homes sold in this price range in ’07 compared to ’06. You can see how a drop in the higher price range, would dramatically reduce the median price of homes.
When pulling stats for a presentation, I ran numbers for Pleasanton, CA and Livermore, CA. In general, homes in Pleasanton fetch a higher price. However, for the month in question, a very expensive vineyard property in Livermore had sold, showing a much higher median price for Livermore compared to Pleasanton for the same month. Without a larger context, that would provide a very skewed perspective on these two communities.
Let’s look at another interesting example and compare Median Sold and Average Sold for May of 2010 with May of 2011.
Units May 2010 Med. May 2011 Med. Units May 2010 Avg May 2011 Avg
31 449,950 465,000 29 501,893 531,708
These two sets of statistics may give the impression that home prices are improving. However, one more statistic tells a very different story, and that is price per square foot.
May 2010 Price Per Sq. Ft. May 2011 Price Per Sq. Ft.
In order to understand the entire picture at the local level (and that could mean your county, your city or your neighborhood, a real estate professional can assist you in a true evaluation where you live.
Need help understanding the numbers before you buy or sell in the Tri-Valley? Contact me for an in-depth look.