Median or Average Price - I'm so confused?

by Doug Nunnery

When it comes to evaluating the real estate market one of the most important factors to consider is the price. But, which price should you focus on - the median or the average home price? Let's take a closer look at the two and how each affects buyers and sellers in today's market.

First, it’s important to clarify the definitions. The average home price is just that, an average, which is simply the total of the prices of all homes sold divided by the number of homes.

On the other hand, the median home price is the middle value of homes sold, with half of them priced lower and the other half priced higher.

Now, let's take a specific example. Suppose you check your local real estate market and find the median price is $200,000. However, the average price comes out to be $280,000. This suggests that a few more expensive homes are driving up the average. But, if you were in the market, you could still expect to find homes priced closer to the median price.

Both metrics have their uses. The median price is a good indicator of affordability in a specific neighborhood or community, while the average price is more relevant for understanding price movement in a broader area.

So, the next time you hear about home prices either rising or falling, make sure to consider the metric, and how it’s being applied. This will give you a clearer understanding of the situation and help you to make more informed real estate decisions.

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