The Los Angeles Daily News reported, “The median price of a previously owned home in the San Fernando Valley hit $600,000 in July, its highest level in eight years, and sales reached their highest total in 27 months, a trade association announced Thursday.
“The median price gained 15 percent, or $80,000 from a year ago, and is now 8 percent under the record high of $655,000 set in June 2007, according to the Van Nuys-based Southland Regional Association of Realtors.
“July’s median was the highest since $595,000 in September 2007, a time when the market was starting to unwind in the early stages of the Great Recession.”
We like to talk about housing prices using “average” and “median.” What’s the difference?
Judy Hedding at About.com wrote an article explaining the difference. First, let’s show how the median price is arrived at:
Here are 11 fictional home prices.
The median price of these 11 homes is $105,000. Five homes were lower priced and five homes were higher priced. The median, really is the middle value. 50% of values are above it, and 50% below it. So when the data is not symmetrical, this is the form of ‘average’ that gives a better idea of any general tendency in the data.
The average price of these 11 homes is $498,000. That’s what you get if you add up all those prices and divide by 11.
What difference does it make? Knowing how average and median are arrived at gives you information you can act on. Suppose you are looking for a house and your realtor says, “The average price of a house in the Washington DC/Baltimore are is $498,000.” You might get discouraged if you are looking for a house priced at $105,000 and say to your spouse, “Honey, we can’t afford to live here. The average house is way above what we can afford.”
However, if your realtor says, “The average price of a house here is $498,000, but the median house is priced at $105,000.” You could take heart that you will find something in your price range, for of all the houses on the market right now, 50% are priced at $105,000 or lower
Both averages looked at over time, will give you information about the state of the real estate market nationally and locally, but doesn’t give you enough information to make you a happy first time home buyer.
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