MEDIAN verses AVERAGE--what they mean

When you read about home price statistics, you often find the words: Median and Average. There's a BIG difference!!!

MEDIAN price is the price halfway between the least expensive and most expensive home/s sold in an area during a specific period of time. During that particular period, half the buyers purchased homes that cost more than the median price and half the buyers purchased homes for less than the median price.

Changes in median price measure changes in market activity. When more consumers purchase less expensive homes than consumers purchasing more expensive homes, the median price falls. And, vice versa; when there are more consumers purchasing more expensive homes than there are consumers purchasing less expensive homes, the median price rises.

Basically, a median price indicates which price range is "most active at that time." So, when you read that the median home price increased 10% in past the six months, this may not mean your home increased 10% percent in value. It could have increased more or less. Keep in mind, if the median price were to drop 10%, this wouldn't necessarily mean that home values dropped by 10%--they may have dropped more.

AVERAGE PRICE:

The AVERAGE home price is the sum of prices of all homes sold in a certain area in a particular time period, divided by the number of properties sold in the same area in that period.

For example, ABC Subdivision in YourTown, USA, had five homes sold in December 2007. The homes were priced at $200,000, one for $250,000, two for $275,000, and one for $295,000. The sum of all of these properties is $1,295,000. Divide that by 5 homes and it equals: $259,000. Thus, the average price in ABC Subdivision is $259,000