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Median vs. Average Home Price Explained

Median Home Sale Price: What Does it Mean?

Median home sales numbers usually provide a better gauge of home prices than average sale price. 

Crofton Home PricesThat’s because “median” represents the price-point where half the homes in an area are selling above and half below, whereas the “average” home price can easily be skewed by a few very high or low sale prices (such as a bank-owned property).  

That’s my quick and easy reply to this question, but the National Association of REALTORS® provides more information and an example on their website:

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In a world of statistical averages, many have asked why the Economic Research Group of the NATIONAL ASSOCIATION OF REALTORS® reports a median home sale value instead of a mean (or average) in its monthly Existing-Home Sales reports (as well as most of its other industry statistics). There are many people who believe the mean is easier to understand than the median. But the median measure is not difficult to appreciate.  Let’s start with defining and differentiating between the two measures.

A mean (average) is calculated by adding up all the values in a distribution and then dividing the sum by the total number of values contained in that distribution. To find a median value, one takes all of the values in the distribution, sorts in ascending order, lines them up and finds the middle value.

They sound similar, and in many instances, there is not much difference between the two values. But the reason NAR concentrates on the median instead of the mean is because the mean value calculation has a limitation that can prevent it from reflecting an “average.” In calculating home sales price statistics this limitation occurs when the sale price of one home varies greatly from the remainder of the homes. This can skew the average.

CONTINUE (Click here to read the entire explanation)

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