Have you noticed that articles about real estate use two words median and average home price almost interchangeably, it seems? As an example, here’s a report on the first quarter of 2018 from the SouthsideDaily. “The most recently completed quarter (January-March 2018) saw home sales increase 3.15 percent over the same time period last year, with a total of 1,472 sales across Virginia Beach. That number includes sales of any dwelling, such as homes, condominiums, duplexes, and townhomes.”
“The median sale price of homes in Virginia Beach was $250,000 (versus $245,000 during the same quarter in 2017), while the average sales price was $305,571 ($290,187 in 2017).”
What is the difference between Median and Average Home Price?/h3>
Judy Hedding at About.com wrote an article explaining the difference. First, let’s show how the median price is arrived at:
Here are 11 fictional home prices.
The median price of these 11 homes is $105,000. Five homes were lower priced, and five homes were higher priced. The median really is the middle value. 50% of values are above it, and 50% below it. So when the data is not symmetrical, this is the form of ‘average’ that gives a better idea of any general tendency in the data.
The average price of these 11 homes is $498,000. That’s what you get if you add up all those prices and divide by 11.
What difference does it make?
Suppose you have a fine French chair you brought back from your trip to Europe. The chair a memento of your wedding anniversary. A friend comes over and asks if this chair will support her. She weighs 250 pounds. Oh yes, you say it will support the average weight of 498 pounds. She sits, and your fine memento collapses into fragments. You meant to say it will support the median weight of 105 pounds.
Knowing how average and median are arrived at gives you information you can act on. Suppose you are looking for a house and your realtor says, “The average price of a house in the Virginia Beach area is $498,000.” You might get discouraged if you are looking for a house priced at $105,000 and say to your spouse, “Honey, we can’t afford to live here. The average house is way above what we can afford.”
However, if your realtor says, “The average price of a house here is $498,000, but the median house is priced at $105,000.” You could take heart that you will find something in your price range, for of all the houses on the market right now, 50% are priced at $105,000 or lower
Both averages looked at over time, will give you information about the state of the real estate market nationally and locally. By understanding average and median, when referring to housing prices, will give you enough information to make you a happy first time home buyer.
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