What does "Average" really mean?

By
Real Estate Broker/Owner with Criado Realty 0548772
I like infographics because it does make statistics a little easier to digest. Take a look at the one I posted below, it's a great way to look at San Antonio's market in a snapshot. To understand these numbers then keep reading to see what they really mean, no punn intended.
 
 
San Antonio Market March 2021 Infographic
 
Trends are really what we are assessing here to help you make informed decisions. Not everyone understands statistics so let me give you a little break down so you'll be able to see the trends for yourself.
 
What does "Average" really mean? There are 3 ways to measure "Average" as we think of the term: Mean (aka Arithmetic Mean), Median, and Mode. Mean is the sum of all the items divided by the # of items. It's not a bad tool but not the best in most cases. Median means to sort by number size then take the number in the middle. This is a better way to measure averages in real estate because the outliers (numbers in extreme) don't have such a significant impact. Mode is the most commonly recurring number in the list of items which isn't very relevant in real estate. Look at the spreadsheet I included here.
 

 
The Mean is $243,900. I would use that number to describe the average price of a home in a market. Compare that to what you might find in LA and then you know on averge we are consideralby cheaper. To be really useful I'd want to see the whole list to really make sense of it, not just $243,900.
 
The Mode is $101,999. I find this number pointless in this scenario and in most real estate cases. Where it might be useful is if you wanted to know how many other sellers have sold their house for the exact price you were thinking of pricing, especially if there are several homes your size and price range. It might tell you how you fare amongst those. Of course you need to factor in home condition and features, not just size, age, etc.
 
The Median is $234,999 is the best statistic if you want to understand market behavior. It tells you that homes are selling mid $200s. But don't read too much into that because there are other factors as is always the case. Its just one measure. It does mean, explicitly, that there are more homes hovering in the $200s but perhaps that's due to average wages in the market support that. If I had a home to sell in the $500s I wouldn't let that bother me too much because even those homes, which are less than 11% of the market presence, are getting multiple offers when in a good area and in good condition. While fewer are selling in general, we have an influx of buyers from CA still who have no problem dropping cash on a nice house that would cost 2-4 x that in their market.
 
The bottom line here is to know the difference in these terms to not throw you off when tyring to understand market activity.
 
I hope you find this useful and even moreso, when the time is right for you to sell your home you will choose me to help you sell.
 
Thank you!
 
 
Posted by
Cathy Criado President & Founder
MBA, REALTOR, BROKER, NAR GREEN, EcoBroker
Published Author
Your Real Estate Consultant!
 
999 E Basse Rd. #180-425, ​San Antonio, TX  78209​
​Direct:  (210) 560-1891
 
Criado Realty Logo
 

Comments (12)

Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Hi Cathy - that is an important explanation.  One single number can be misleading and some people do a good job of explaining the variation in their market reports.

Apr 28, 2021 09:07 AM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Cathy - the world can be confusing so the definition of "average" needs clarification.  It depends on the situation and the circumstances.  As well as perspective.  

Apr 28, 2021 09:58 AM
Cathy Criado

True. If there was anything I retained from grad school statistics I, you can manipulate numbers to say what you want them to say, unfortunaely. Thanks for stopping by!

Apr 29, 2021 05:49 AM
marti garaughty
garaughty.com - Montreal, QC
a highly caffeinated creative type...

 

You're a featured sharp cookie @The Art of Marketing YOU... cookie image will be uploaded if/when AR fixes their chronically dysfunctional system !

 

Apr 28, 2021 10:10 AM
Cathy Criado

Thanks Marti! You do like to feature me, and I appreciate it very much!  Thanks for stopping by!

Apr 29, 2021 05:50 AM
Steffy Hristova
HomeSmart Elite Group Tempe AZ Tel: 480-966-9353 - Tempe, AZ
Tempe AZ Realtor - Your Home Close to Your Work!

Cathy, Great illustration of why median price is a better indicator of what is prevalent in the market. Averages are more influenced by outliers, like a luxury sale, or some human error like a typo of an extra 0 or two. :)

Apr 28, 2021 11:57 AM
Cathy Criado

Yes, the outliers can corrupt avegages. Its not uncommon for statiticians to take out the highest and lowest number to evaluate outcomes. Thanks for stopping by!

Apr 29, 2021 05:51 AM
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Hi Cathy- I too like Infographics for the very reason you stated. And what a great explanation of Average!!!   Good to see you back here. 

 

Apr 28, 2021 12:01 PM
Cathy Criado

Thanks Kathy! It is good to be back!  Thanks for stopping by!

Apr 29, 2021 05:52 AM
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

May 01, 2021 06:38 PM
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, eXp Realty - Kalispell, MT
Helping your Montana dreams take root

I use median in my market reports, not average, and I do that because it does get rid of the outliers that could totally swing the average.

Enjoy your day!

May 02, 2021 05:09 AM
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Happy to see you back in the Rain, Cathy Criado - numbers are fascinating they can tell very different stories depending upon the perspective, but somewhere in there lies the truth. 

May 02, 2021 06:16 AM
Cathy Criado

Thank you friend! Same here!  

May 03, 2021 05:01 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Cathy Criado,

I'm so glad that Kathy Streib featured your post in her "Ah-ha" moments for the week. Understanding the difference in the terms used is key to understanding what the market is really doing. Excellent post.

May 02, 2021 06:17 AM
Cathy Criado

Thank you Dorie. Glad to be back! I appreciate the notice too. 


 

May 03, 2021 05:01 AM
Hannah Williams
HomeStarr Realty - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-820-3376

So glad Kathy and Marty Featured this as I missed this post 

May 02, 2021 07:53 AM
Cathy Criado

Thank you Hannah! Me too! Its always nice to be appreciated.


 

May 03, 2021 05:01 AM
Rocky Dickerson
Realty One Group - Las Vegas, NV
Superior Service!

Great job with the post Cathy Criado many folks could use these definitions

May 02, 2021 10:30 AM
Debbie Gartner
The Flooring Girl - White Plains, NY
The Flooring Girl & Blog Stylist -Dynamo Marketers

Great explanation for terms that confuse many.  I also look at mean vs median to understand dispersion of the market. In your area, it's pretty tight. I'm not a real estate agent, so my numbers are outdated, but in my area, median was 650,000 and mean 830,000 as we have more high end homes at the extreme. 

May 15, 2021 06:45 AM