What Does Median Home Price Mean...And Why Should I Care?
Most people understand the average home price in a neighborhood, but don't understand the median price and why it's used. What does this mean, and why should you as a home buyer or seller care?
The median price (number) is the middle number of all of the properties in an area. So for example let's say you have seven homes listed in a particular neighborhood. To determine the median price of these listings you write down the numbers from lowest to highest. The median is the middle number. If you have an even number of properties, you take the two middle numbers and find the average of them. That would then be your median price.
Why might you be concerned about median price versus average price? The median price can often be a more accurate representation of the value in a neighborhood. Median prices aren't affected by large price deviations.
Here's an example to better illustrate my point:
You have seven homes listed in a neighborhood. You want to know the average listed price. So here are the prices:
The average listed price of these properties would be $408,571. Is that a fair representation of neighborhood prices? No. The median listed price in this neighborhood is $230,000. In this case the median value best reflects the pricing for this neighborhood. An average price would throw the neighborhood value way off. Now this example may seem extreme, but it really gets the point across.
The median price can also give buyers an idea if a particular neighborhood is in their price range. Median prices can also be looked at over time to see how a certain area or neighborhood stands in the local market.
Keep in mind the median price is only one factor that should be considered. Not all homes are the same. Upgrades and location should also be given consideration. This is where it's best to have a real estate agent help you determine a fair neighborhood value for a particular house.
I've lived on Colorado's Western Slope for over 26 years. I love this area and all it has to offer, and I enjoy sharing what I know about my home. As a REALTOR®, I also love to share my expertise in this area as well. If you need any real estate information for Montrose County, or Delta County, Colorado...please give me a call.