Median prices are the most useful measure available for those
looking to find out information about the cost of homes in an area.
The median is the midpoint between a high and a low. Median prices
are not the same as average prices, and, in fact, are much more useful
than average prices.
As a matter of fact, median prices are the standard measurement of
home prices in the real estate industry. This is because of the nature
of median prices versus average prices.
To calculate a median price you arrange all of the prices in a set
of numbers in order, and then choosing the number in the middle (or by
calculating an average of the two numbers in the middle if the set of
values is odd).
To calculate an average you add up all prices in a set, and then divide them by the number of prices that were in that set.
Why are median prices more useful than average prices?
The problem with an average price is that it includes outliers –
that is, homes priced well above and well below the cost of other homes
in the area. These outliers skew the average and leave you with a price
that does not accurately reflect the asking price of houses in the area.
Additionally, the median price is a much better reflection of
real-time market activity and allows individuals better insight into
their own real estate transactions at a given time.
Knowing the median price in a given area allows investors to
determine if a specific property is a worthwhile investment, whether
they are accounting for the median price of homes available for sale or
they are interested in knowing the average cost of leases within a given