Median Trumps Average in Real Estate Statistics

By
Real Estate Agent with Baird & Warner Real Estate

I like working with statistics and trying to gauge which way the Winnetka and North Shore real estate market is heading. I run into problems, however, because each village is so small. I could lump all the villages together - Winnetka, Wilmette, Kenilworth, Glencoe and Northfield  - but they are also different from each other.

Often, the numbers are skewed and basically worthless for any kind of consideration. This is particularly true when using averages in an area where a $450,000 can sell in the same town as a $10,000,000 home.

Take the most recent numbers I ran for the average sale price for the first two months of 2017 vs 2018 for Winnetka.

  2018 Average Price 2017 Average Price Difference
Winnetka $2,160,000 $1,310,000  + 65%



Wouldn't everyone be listing their house for sale in Winnetka if the market were really increasing at 65% in a year! A closer look reveals that there were two outlier sales of $8,875,000 and $10,000,000 and of the 22 homes that sold, only 8 were under $1 million. There goes the veracity of the averages.

A similar situation occurred in tiny Kenilworth where the home price increase was even more startling: 99% increase. In 2017 there were 4 home sales all under $1 million with two of them under $500,000. But in 2018, there were 3 sales over $1 million and one just below.

So I'm making a good case for using the median sold price - here's Winnetka again using the median measure.

  2018 Median Price 2017 Median  Price Difference
Winnetka $1,237,000 $1,142,000 + 8.3%



This is a much more accurate snapshot of our real estate market for that period of time and a good reminder to be wary of all the numbers being tossed around. Using the median when calculating real estate makes sense since the median in not affected by outliers and it's the true middle of the pack number. The average will be skewed every time the high or low numbers make an appearance. However, the median can also be skewed at times - particularly when the sampling is small.

When clients ask me how the market's doing, I like to know the answers. It's just sometimes a little trickier on the North Shore to get an accurate and factual assessment given the size of the towns and disparity in home prices. But clearly, the median number should be used for real estate statistics to get a realistic view of what's happening.

To CONTACT Margaret Goss, please call 847-977-6024 or email:  margaret.goss@bairdwarner.com

Margaret Goss is a full-time real estate agent since 1998 servicing the North Shore communities of Winnetka, Wilmette, Kenilworth, Glencoe, Northfield, Glenview, and Evanston.  See full BIO for Margaret Goss.

 

Posted by

Margaret Goss - Winnetka and North Shore Real Estate Broker
Specializing in homes for sale in Winnetka, Wilmette, Kenilworth, Northfield, Glencoe, Glenview, Northbrook, and Evanston.

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Comments (7)

Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

Statistics can be manipulated so it is important to know why they say what they do. This is a good explanantion of why we often use median price, but as you say when the sampling is small this too can be off. But even knowing what the outliers are and being able to say that shows you know your market and what is going on so sellers and buyers can trust you for advice.

Mar 07, 2018 01:35 PM
Anna Banana Kruchten CRS, CRB, Phoenix Broker
HomeSmart Real Estate BR030809000 - Phoenix, AZ
602-380-4886

Margaret - great explanation of average vs median.  Stat can be maniuplated to show all kinds of scenarios and it's imporant for consumers to have a knowledge of this - and a go to agent to help make sense out of all of it. We too have areas that are so far out of wack and will bring the average look ridiculous - but like you said, calcualating the median makes good sense.

Mar 07, 2018 02:39 PM
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

There is simply no substitute for getting a local agent, like you for Chicago's North Shore, and truly getting a clear picture of what any particular home is worth.

Mar 07, 2018 03:53 PM
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

The 65% increase in average sales price over 2017 is significant, Margaret.

Mar 07, 2018 04:46 PM
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Margaret- what an excellent explanation showing the difference between Median and Average!   It really does make a difference. 

Mar 07, 2018 06:38 PM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Margaret

This is so true! We see the same thing in many communities with dramatic shifts, up or down, depending on some of the extremes.

Your post is excellent education for buyers, and sellers, but also a great example of why they need to speak with someone like you to truly understand what is happening with prices and trends.

Jeff

Mar 28, 2018 09:25 AM
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Margaret what an excellent point, I smile when I see some people do not even know the difference between the two:)Endre

Apr 04, 2018 06:41 PM

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