What’s the difference between a median vs average price?

Have you ever looked at a Real Estate market report and saw both a median and an average sales price listed?

What’s the difference between a median vs average sales price?

 

 

 

Let’s take look at an example to make it easier to understand the difference.

Let’s pretend that last month there were 9 sales of single family homes in County XYZ with these sales prices
$205,000
$309,000
$312,000
$319,000
$325,000
$388,000
$396,000
$455,000
$495,000

These sales would give us an average sales price of $356,000 and a median price of $325,000.
So why such a difference?

Average Price

That’s because the average sales price is the total dollar figure of the sales divided by the number of properties sold.
Really high or low priced properties can skew the average

Median Price

The median price, on the other hand is the midpoint were half of the sales had a lower price and half had a higher price.

In this sample scenario, the average price is less than 10% higher than the median price. The difference is often more dramatic.

For example, in January 2017, the median sales price of a single family home in San Diego was $559,500 while the average sales price was $698,524. That’s almost a 25% difference.

Both of the figures give us a pretty good indication of how home prices are trending since we can see them moving from month to month.

In my opinion, the median price give us a better picture on the affordability of homes since we know that half will be more expensive and half will be less expensive.

What do think? Which figure would you go by? Let me know in the comments below.

So that is all I have for you on the difference between a median vs average sales price.

If you have any questions about this topic or any other mortgage or real estate related topic, please reach out.
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