Average, Mean and Median - Terms used in House Price Market Reports

By
Real Estate Sales Representative

image of a list showing house prices

Average, Mean & Median - 3 Essential Terms used in Real Estate Market Reports

Real estate information provided by Brian Wiseman LL.B., CIPS of Keller Williams Energy Real Estate Brokerage

 

These 3 essential terms are used in Real Estate Market Reports to show  house prices in certain geographical areas, over a specific period of time.

 

Whether it was a Buyers’ Market, Sellers’ Market or Balanced Market, in that geographical area, and during that time period is determined by various calculations involving these 3 essential terms.

 

image of a question mark inside a headThose 3 terms often cause confusion.

 

The 3 terms are:

·      Average Price

·      Mean Price

·      Median Price

 

image of calculator, paper and penAverage Price:

Average Price is calculated by adding together the sold price for each of the particular number of properties sold and, then, dividing the total of the sold prices by the number of properties sold.

 

Mean Price:

If someone says, “It’s a mean price”, you could be excused for thinking they are referring to the price paid on a specific property.

 

Not necessarily so!

 

In market reports covering trends in the housing market, the expression is more likely to relate to statistical information.

 

In statistical terms, the mean price is the arithmetic average of a specific number of sold prices.

In other words, it has exactly the same meaning as the average price.

 

Median Price:

image of a figure with a listDon’t be confused by this term.

It has nothing to do with mean price!

 

The median price is the price found at the exact middle of the list of sold prices.

The median price can be ascertained by listing all sold prices in ascending (or descending) order and then locating the sold price in the centre of that list.

 

If there are an even number of sales, then there is no single middle sold price; the median price is then usually determined by calculating the mean (or average) of the two sold prices in the middle of the ascending, or descending, list.

Some Examples:

calculation of average where prices are equally spaced

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average, or Mean, Sold Price is:

Total of Sold Prices divided by the number of sales

$4,345,000/11 = $395,000

 

Median Sold Price is the sold price which is in the middle of the list.

In this case it is the 6th sale (5 are above it and 5 are below it)

i.e. $395,000

 

In this example the average, or mean, sold price is the same as the median price.

 

However, in the case of real estate sales, it is not often that average,or mean, sold price is the same as the median price.

 

What happens if there are some high priced sales during the period?

 

Example:

average calculation where 2 prices are increased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Average, or Mean, Sold Price is:

Total of Sold Prices divided by the number of sales

$5,044,600/11 = $458,600

 

Median Sold Price is the sold price which is in the middle of the list.

In this case it is the 6th sale (5 are above it and 5 are below it)

i.e. $395,000

 

So, the higher priced sales #10 and #11 have significantly raised the average, or mean, sold price above the median price.

 

What happens if there are some low priced sales during the period?

Example:

calculation of average where 2 prices are reduced

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Average, or Mean, Sold Price is:

Total of Sold Prices divided by the number of sales

$4,099,700/11 = $372,700

 

Median Sold Price is the sold price which is in the middle of the list.

In this case it is the 6th sale (5 are above it and 5 are below it)

i.e. $395,000

 

So the lower priced sales #1 and #2 have significantly lowered the average, or mean, sold price below the median price.

 

Conclusion:

image of a figure with a long listWhile the average, or mean, sold price and median sold price can be the same or nearly the same, they can be very different if some of the sold prices are much higher, or much lower, than the others. In the jargon of statisticians, this is called skewness.

 

In such cases, the average, or mean, sold price can be significantly skewed away from the median sold price.

 

When this happens, the median sold price gives a better representation of central tendency than the average, or mean, sold price.

 

 

Find Houses for Sale in Oshawa, Whitby, Clarington, Ajax & Pickering, Ontario

image of houses below a magnifying glassYOU ARE INVITED to visit my website, at any time and as often as you like, to find pictures & details of homes for sale

 

For photos and details of houses for sale:

 

Pickering Houses for Sale

 

Ajax Houses for Sale

 

Whitby Houses for Sale

 

Oshawa Houses for Sale

 

Clarington Houses for Sale

 

You can also arrange to be notified when homes, that meet your criteria, come onto the market.

These services are available to you without obligation.

 

image of a figure and the words "What is my home worth?"

If you are thinking of selling, you can also:

·         Search on my website for homes, similar to yours, that would be competition for your home, if you list it for sale

 ·  Obtain an indication of the market value of your home

 

For answers to your questions, email me; or call 905-723-5944.

 

 

About the Author:

photo of Brian WisemanBrian Wiseman LL.B., CIPS, is a Sales Representative with Keller Williams Energy Real Estate Brokerage in Oshawa & Whitby, Ontario, Canada.

 

In his past lives, Brian was a Partner in Legal Practices, specializing in Real Estate and Business Law in Australia and a Principal of a successful Financial Planning Practice in Australia.

 

After the sale of his business interests in Australia, Brian started a new adventure by relocating to Canada with his Canadian wife.

Comments (1)

Troy Erickson AZ Realtor (602) 295-6807
HomeSmart - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Brian - Great job explaining the different ways to report home prices in market reports. 

Apr 13, 2015 02:34 AM