An Easy Way to Explain the Difference Between Median Price and Average Price, Sometimes the Disparity Can Be Huge. Here's a Naples, Florida Twofer For Ya!

By
Real Estate Agent with Florida Supreme Realty SL514814

What's the Difference between Median Price and Average Price.  Depending on what is being portrayed the use of these terms interchangeably will confuse the best of us.  Many times this is how the National media leaves the consumer with innaccurate information and in a sad and unnecessary state of FLUX!

Example:  Imagine you're about 8 or 9 years old and you and good ole' Uncle Bill want to enjoy a ride on the see-saw together.  But darn it, Uncle Bill is 240lbs. and you're only 67lbs.  How is this going to work?  You yell out to Johnny to hop on which adds 63lbs.  Mary helps out too at 56lbs.  Finally, Juan at 54lbs. balances the scales.  Johnny is at the median weight 63lbs. with two riders weighing more and two riders weighing less.  Be wary though, Uncle Bill has been know to jump off at the most inopportune time so keep a watchful eye on him.

Back to the chart above.  The price in each of the columns reflect the point of balance wherein exactly half of the homes sold exceed the price shown and the remaining half are below that price.

Average Price is a lot easier to understand.  Add up every sale price for whatever time frame you're analyzing then divide it by the number of examples that led you to that figure and you've got the average.

Example:  We have Uncle Bill at 240, you at 67, Johnny at 63, Mary 56 and Juan 54 lbs. add them up.  240+67+63+56+54= 480  then divide 480 by the number of anxious see-sawers, 5 and you get 96.  480÷5=96  That's their average weight in pounds.  Uncle Bill may still threaten to jump off at the most inopportune time though so pay especially close attention when you've got him on the down stroke.

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Re-Blogged 1 time:

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1. Richie Alan Naggar 09/14/2011 06:17 AM
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Rainer
284,418
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Kevin,  Like you point out the median and average prices can vary a great deal.  You must have a few very high value homes selling each month to skew the numbers this month.  Hope you are getting a few of those.

Sep 14, 2011 07:25 AM #2
Rainmaker
3,153,380
Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

What a great post..I am sure many of us take advantage that some folks just dont know the difference!

Sep 14, 2011 07:54 AM #3
Rainmaker
1,009,196
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

Joshua, you're going to need a 2nd home here soon aren't you?  Keep watching!

Steven, you get it!  Every couple of months there are some \$20M+ sales and frequently the more common \$7M and up "skew" things a little.  No complaining though, especially if I can snag one.

Kristin, I never know if the reporters intentionally slur the word median into medium but it happens.

Sep 14, 2011 08:21 AM #4
Rainmaker
225,689
Shannon Lefevre
John R. Wood Properties - Naples, FL
Shannon Lefevre, PA Your Naples Smart Girl

Kevin...you are SO funny! If only we could get our media friends to explain what you just did using the same scenario LOL!

Sep 14, 2011 10:32 AM #5
Rainmaker
1,009,196
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

Shannon, that would be too darn easy of a visual for the crew, don't you think?  Educate, educate, educate!

Sep 14, 2011 12:22 PM #6
Rainmaker
4,484,007
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Kevin,

This a clear and concise explanation, you should send it to the reporters, I think the slur between median and medium reflects their ignorance...Like you say, Educate, educate, educate!  LOL A

Sep 15, 2011 05:32 AM #7
Rainmaker
1,009,196
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

Alexandra, I'll correct one each day with a response then by next year we'll be sitting pretty!  I know that I can't make it a more simple explanation than this.

Sep 15, 2011 10:56 AM #8
1,509,412
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

Great explanation to the consumer what ave/med prices are and what the difference is!!

Kristin:  DIGGING THE SWEATER!

Sep 16, 2011 04:42 AM #9
Rainmaker
841,108
Joshua Zargari
MJ Decorators Workshop LI staging and home decorating - Lynbrook, NY
MJ Decorators Workshop

Hello, Kevin.

Thank you for the post.

Have a nice weekend.

Sep 16, 2011 10:55 AM #10
Rainmaker
1,009,196
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

Waiting for it to begin Joshua!

Sep 16, 2011 12:12 PM #11
Rainmaker
1,793,677
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in North Kingstown RI and beyond

Well Kevin...well explained and although many of us should have learned this in elementary math it escaped many so a fair explanation is in order...thanks

Sep 17, 2011 07:36 AM #12
Rainmaker
1,009,196
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

Ginny, this might even be the "OLD" math.  Weren't you wondering where it had gotten to!

Sep 17, 2011 07:46 AM #13
Rainmaker
671,751
Sandy Shores FL Realtor®, Melbourne Real Estate
M & M Realty of Brevard Inc. - Melbourne, FL
Brevard County Real Estate, Florida's Space Coast

Kevin, This is a great way to explain median price and average price in ordinary terms.  I think you missed you calling.  You should have been a school teacher - you would have done an awesome job! Great post!

Sep 20, 2011 08:15 AM #14
Rainmaker
1,009,196
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

Sandy, possibly, I've often thought about becoming a Tazer instructor.  Also helpful in many Real Estate transactions.

Sep 20, 2011 01:44 PM #15
Rainmaker
433,582
Kristine Ginsberg
Elite Staging and Redesign, LLC - Short Hills, NJ
NJ Home Stager

Kevin - thanks for explaining in simply and understandable terms the difference between median and average home prices - even a layperson like me understood this!

Sep 23, 2011 01:32 AM #16
Rainmaker
1,009,196
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

The two terms are too often misused when relating to Real Estate Kristine.  You've made me feel good that I was able to clarify their meanings for you.  Back to the see-saw for me!

Sep 23, 2011 08:12 AM #17
Rainer
225,278
Kirsten Lindquist
Pacific Union International - Sonoma, CA
Realtor - Sonoma Wine Country

Kevin:  Well done...love your sense of humor.  I'll ride a see-saw with you any day....if you'll let me bring a friend and promise not to jump off!

Sep 23, 2011 05:19 PM #18
Rainmaker
1,009,196
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

The more the merrier Kirsten, although I am reluctant to add the no jumping rule.

Sep 24, 2011 03:08 AM #19
Rainmaker
271,446
Dave Roberts
Healdsburg Sotheby's International Realty - Healdsburg, CA

Kirsten and I work in different towns in the same general market served by the Santa Rosa Press Democrat. It's interesting watching the newspaper reporting on our median and average price. Both our towns can have a month with several multi-million dollar sales. That's not too bad in a busy month with plenty of more-normal pricing, but in slow times we get reporting that Healdsburg or Sonoma have an average price in the millions. It's great for morale of general home owners, but it's not true. The other factor I would add to your great explanation of median and average is the need to do some averaging across months to smooth out the peaks and valleys of random sales fluctuations. Maybe I'll write a post abour rolling averages...

Sep 25, 2011 12:29 PM #20
Rainmaker
1,009,196
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

Dave, as in our market a while ago we had 3 home sales in one month which added nearly \$80,000,000 to our statistics.  The median price jumped by almost a quarter and although we could explain it away, the general public would not necessarily have known it's cause.  I'll watch for your "rolling averages" post.

Sep 26, 2011 02:55 AM #21
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Rainmaker
1,009,196

Kevin J. May

Serving the Treasure & Paradise Coasts of Florida