The median house price is one of the most common measurements used to compare real estate prices in different markets, areas, and periods. It is said to be less biased than the mean (average) price since it is not as heavily influenced by a small number of very highly priced homes.
Definition
Median is a mathematical result that indicates that one half of the group is higher and one half lower. Median price of 101 sold homes would be that price which is lower than 50 of the prices and also higher than 50 of them.
Do not confuse this term with the average. They can be quite different for the same sample group. For instance, if you are doing a sold properties report and the homes are very evenly distributed, the median and average might be very similar. However, if the homes sold were weighted more to one end or the other of the price spectrum, then the median and average could be quite different.
The median value with any figures is the middle value in that range of figures so the median value in the set of figures 5, 7, 12, 15 and 16 is 12 – it’s simply the middle figure.
When people are using this information in connection with property, they are simply talking about the middle price of all the houses sold in the area and timeframe being monitored.
Summary
Median is a more accurate indicator of a market because it is a closer reflection of the sample set
Mean can be misleading. It doesn’t show us what is actually going on in the middle of the range
Example
Two homes – one is valued at $500K, the other is $100K
There is no median – we’d know that the values are in extreme ranges.
The mean = $500K + $100K divided by 2 = $300K but there aren’t any actual homes listed in that range
Taking an average of a set of figures smooths out the data
An average can be skewed by a big set of numbers in the high range or the low range
MOVING ANNUAL MEDIAN HOUSE PRICES
FROM DEC 2005 – DEC 2015
REFERENCE: RESIDEX JANUARY 2016
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