Median Price Vs. Average Price – Investigate the Numbers!

By
Real Estate Agent with Alain Pinel Realtors, Pleasanton, CA BRE#01732313

Investigate StatisticsNews reports often quote sales statistics for the country, a state or even a metropolitan area. The most bandied about quantifier has to be the term ‘median’.  But what does that really mean?

In real estate terms, it’s the mid-point in a set of numbers. So, if 101 homes sold in a given month, it would be a number signifying that 50 of the prices are lower and 50 of those prices are higher.

In contrast, average sales price is the sum of those 101 home sales prices, divided by 101. 

Let’s look at a real time example.  For the month of May in Livermore, CA, here’s how those numbers really play out.  Looking at sales figures for single family homes sold between the dates of May 1st to 31st, 2011 85 homes sold.  Here’s how the numbers play out:

                        Median Sold                         Average Sold

                            465,000                                  531,708

You can see that there is a significant difference between those two figures. Many other factors can be at play when evaluating statistics.  A few good examples come to mind:

In September of ’07, high balance loans were exceptionally hard to come by, so very few homes over $1,000,000. Half as many homes sold in this price range in ’07 compared to ’06. You can see how a drop in the higher price range, would dramatically reduce the median price of homes.

When pulling stats for a presentation, I ran numbers for Pleasanton, CA and Livermore, CA. In general, homes in Pleasanton fetch a higher price. However, for the month in question, a very expensive vineyard property in Livermore had sold, showing a much higher median price for Livermore compared to Pleasanton for the same month.  Without a larger context, that would provide a very skewed perspective on these two communities.

Let’s look at another interesting example and compare Median Sold and Average Sold for May of 2010 with May of 2011.

Units    May 2010 Med.   May 2011 Med.       Units     May 2010 Avg     May 2011 Avg

   31          449,950               465,000                  29             501,893               531,708

These two sets of statistics may give the impression that home prices are improving. However, one more statistic tells a very different story, and that is price per square foot.

         May 2010 Price Per Sq. Ft.                       May 2011 Price Per Sq. Ft.

                         $270                                                               $252

In order to understand the entire picture at the local level (and that could mean your county, your city or your neighborhood, a real estate professional can assist you in a true evaluation where you live.

Need help understanding the numbers before you buy or sell in the Tri-Valley?  Contact me for an in-depth look.

 

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Rainmaker
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Kathleen Vetrano
Coldwell Banker Residential Brokerage - Prince William, VA
Luxury Home Real Estate Consultant

Many people/buyers/sellers do not know the difference.  You've explained it very well here.

Jun 24, 2011 01:37 AM #1
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Liz and Bill Spear
RE/MAX Elite 513.265.3004 www.LizTour.com - Mason, OH
RE/MAX Elite Warren County OH (Cincinnati/Dayton)

Karen, Nice breakdown of the terms and the trends for your area.  Knowing what the numbers mean can be the difference between success and failure with pricing of a home.

Jun 24, 2011 06:28 AM #2
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Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Karen, I belive that the number sold needs to be added to the picture to show a better representation of what is going on. Great points in your post.

You are featured in Bananatude!

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Jun 24, 2011 06:51 AM #3
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Karen Crowson
Alain Pinel Realtors, Pleasanton, CA - Livermore, CA
Livermore Wine Country Homes

Kathleen - there are many nuances, so it can be very confusing if you don't have the story behind the numbers.

Liz and Bill - right you are.  We have to do our homework!!

Andrea - great suggestion - I've added that in!!

Jun 24, 2011 09:08 AM #4
Rainmaker
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Tom Arstingstall, General Contractor, Dry Rot, Water Damage Sacramento, El Dorado County - (916) 765-5366
Dry Rot and Water Damage www.tromlerconstruction.com Mobile - 916-765-5366 - Placerville, CA
General Contractor, Dry Rot and Water Damage

Thanks for the explanation Karen. Without help, median and average values can be confusing.

Jun 24, 2011 09:09 AM #5
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Judi K Barrett
Judi Barrett~Integrity Real Estate Services~Idabel, Oklahoma - Idabel, OK
Broker/Owner, Integrity Real Estate Services -IDAB

It seems that the media always quotes the median price of homes in an area but often buyers want to know the average price of homes in a neighborhood that they are considering.  Always have to explain the difference.  Nicely done.

Jun 26, 2011 06:28 PM #6
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Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Karen I loved your clarification too may buyers and sellers have no idea, because they are too busy listening to the Media with National averages:)))

Jun 27, 2011 02:57 AM #7
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Karen Crowson

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