The Average vs. Median Sales Price

Average vs Median Sales PriceWhen we release our monthly market report, STAT, it brings up a question: What’s the difference between the average and median sales price and which is better?

Average Sales Price
The average sales price for September 2012 was $198,800. All sales are added together and divided by the number of sales to derive the average sales price.

Median Sales Price
The median sales price for September 2012 was $150,000. All sales are lined up in a list ordered from lowest to highest, the sale in the middle of the list, is the median sales price.

Which is method is better?
While it can be debated, many consider the median sales prices to be a better indicator of the market. This is because the average sales price tends to be skewed by outliers, mainly multimillion dollar properties. Look at this example below:

Sales:
$112,000
$132,000
$140,000
$146,000
$178,000
$275,000
$1,000,000

The median sales price would be $146,000 and average sales price would be $283,285. Regardless, we provide both the average and median sales prices in STAT,

  • http://www.facebook.com/amyhayslett Amy Billen Hayslett via Facebook

    What about the average price per square foot? I find when looking at the average and median pricing for a smaller niche community like Verrado, the median price bounces around too much. If you have a few extra homes on either the large or small square footage within a given month, the numbers fluctuate quite a bit since there may be only 15 to 20 closings in a given month.

  • http://www.facebook.com/armls ARMLS via Facebook

    You are correct Amy, there are better indicators when looking at a niche or specific area of the market. We have price per square food on page 7 of STAT, it comes with a warning as we look at price levels and not communities.

  • http://www.facebook.com/shannonhubbardaz Shannon Hubbard via Facebook

    Yes, I agree that median price is best indicator of price for Valley overall.