Don’t confuse the two: Average price and median price are not the same at all.
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Though many believe average price and median price are interchangeable terms, this couldn’t be further from the truth. Understanding how the two are calculated makes a huge difference when you go to price a home, and there’s a reason why I rely on one much more than the other when pricing.
To find an average price, we take a number of homes, add up their sale prices, and divide the total by the number of homes. To find the median price, we take that same number of homes, but instead of adding them all up, we simply find the home that’s priced right in the middle. You can see an example of this at 1:07 in the video.
The median price shows a better example of what people typically pay.
I find median price to be much more representative of what homes typically sell for in a neighborhood. But keep in mind that we need a decent sample size to find a reliable number for both average and median prices.
With the example at 1:44, you can see the home’s price is much lower than the median price. This could be for a number of reasons, such as its condition. On the other end are higher-priced homes, which may have been extensively remodeled. Low- and high-priced homes skew the average and give you an unrealistic number. The median price shows a better example of what people typically pay.
Though the median price can give you a rough idea of how to price your home, there are still many other factors to consider before settling on a number. If you’re looking to buy or sell a home, have any questions, or would like more information, feel free to reach out to me. I look forward to hearing from you soon.
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