What’s the Difference Between Median Sale Price and Average Sale Price?
When looking a housing market trends report in your area, you might see there are 2 type of price: median sale price and average sale price. So, what’s the difference between median vs average sale price, and which numbers should you rely on as a measure of typical home prices?
What is median sale price?
The median house price is the midway point of all the houses sold at market price over a set period (monthly, yearly, quarterly, etc.). For example, if there were 101 houses sold during the month, the median sold price would be the house price in the middle i.e., that has 50 house prices above it and 50 house prices below it.
The median sale price, then, represents the figure at which half of the properties in the area sell at a higher price and other half at a lower price.
What is average sale price?
The average sale price is calculated by adding all the sale prices for homes sold in a specific area within a specified time frame and dividing that total by the number of properties sold. For example, if there were 100 houses sold during the month, the average sold price would be calculated by adding the sale prices for all the 100 homes and then dividing that number by 100.
The problem with the average sale price is that if one or more properties were sold at an extraordinarily high or low price, the average is skewed higher or lower as a result. In this case, the average becomes a somewhat unreliable metric.
Median sold price and average sold price example
Here is an example how median sold price and average sold price being calculated.
$100,000 (foreclosure)
$150,000 (short sale)
$175,000 (traditional sale)
$200,000 (traditional sale)
$225,000 (traditional sale)
$250,000 (traditional sale)
$2,000,000 (traditional sale)
Median sold price: $200,000
Average sold price: $442,857
While most people think an average sold price will give a more accurate representation of the data. However, as you can see from above, the median is the better option.
Is the median sold price or average sold price better?
Both the average sale price and median sale price can be valuable when you are trying to determine home price. It’s important to remember that the average sale price may be skewed if there are luxury homes sold in that particular period. The median house price should just be one tool you use to get a feel for how the market is doing. However it’s important to also look at recent comparable sales for a clear understanding of the market.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.
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