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What is the difference between average price of homes and median price, and why the difference in the range?

John Peaspanen
StarNews

Photos.com

Realtors Art Ricks and Deryl Smith of Sweyer & Associates Century 21 helped explain the process that determines these prices.

Ricks said, “The average is taking the whole unit sales of an area adding to one number then dividing by the number of units.”

Smith added, “The median price is the middle price on the list. If there are eleven homes, home sale number 6 is the median as it is preceded and followed by 5 homes.”

Both realtors said there will be a significant disparity between the average and median, if the prices in the list of homes are not progressing top to bottom by a similar spread between each home.

Smith gave an example, “In the example of eleven homes, if homes seven through 11 are $750,000 to $1,500,000 and homes one through six are $250,000 and below, then the average will be much higher than the median. If homes six through eleven are $1,000,000 to $1,200,000 and one though five are $75,000 to $100,000, then the median will be much higher than the average.

If there are an even number of units, Smith said, the mean will be halfway between the two middle numbers.

Ricks and Smith can be reached at Sweyer & Associates office at 910-726-3527.

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One Response to “ What is the difference between average price of homes and median price, and why the difference in the range?”

  1. On July 22, 2013 at 3:40 pm Maurice Cunningham wrote:

    N.B. I just sent a comment to you about two hours ago. upon reflection I fear I may have made a dyslexic inversion of the concepts of “average” and “median” in my reasoning – I am not sure as I have no copy of my remarks. To reiterate, I made a distinction of these two concepts as to mathematical meaning and applied meaning in the marketing world of real estate housing. In this real-world context with generally a small number of expensive houses and a preponderance of numbers of less expensive houses, the average price will be “skewed” to an unrealistic higher theoretical price that makes the real estate market look better than it actually is. This may help realtors in making an erroneous “good impression” of the housing market, but it confounds home sellers and buyers in trying to get the “feel” of real market prices. Therefore the median price is the only really valid one in the vast majority of cases for getting a “feel” for real time market prices.