Updated: Mar 4, 2022
An above average
In real estate, you know it would be wise to get information on the "current real estate market" in your area. Easier said than done. There is a lot of ways to get information, but how you digest the information is important. Here are a few different ways you can look at market trends in your town.
You can look up real estate articles from a local news source
You can ask your real estate agent for marketing data
You can also ask your real estate agent for help reading this data...
"Home sales" data is almost always collected after the fact. It is known as "lagging data" because it is somewhat old by the time we read about it. You are looking at homes online today, but you are comparing prices with homes that were available six or more weeks ago,
Other things that affect the market price include:
The number of similar homes for sale at a current time period
The number of buyers looking for a home in a similar price range
Seasonality! More data is collected in the late spring and summer months in most states, because more homes are being sold during those time periods.
Homes are put on the market for sale (the listing price) but they don't really reflect a home's market value. Your real estate agent can help you figure out what the best data to use, which takes into consideration ALL of the above information. Great! Now.. you have the data and you are looking at the average price and the median price
The first question when looking at a specific home is:
"How do you know a home is worth the money?"
The words "average" and "median" are often used incorrectly and interchangeably when reporting data and can lead to picking whatever number is skewed in the interpreter's favor.
Zillow likes to use the word typical, whatever that means...
Average vs. Median in Real Estate
The Average also known as the "mean" of a certain set of numbers is
the total of all the numbers / divided by the number of items in a "set."
The Median of a certain set of numbers is
exactly half of the numbers are lower and half of the numbers are higher.
Quarter 2 Data for NH Rockingham County
Residential Real Estate Report (April, May, June)
Single Family Homes Sold: 933
Condos Sold: 472
Mobile Homes Sold: 57
Average: If you add up all the prices in the "closed price" column from the chart above, and divide by 7 (the number of homes) you get the average price of $736,214
Median: If you place all of the "closed price" homes in order from most expensive to least expensive, and find the MIDDLE number - that is your median price. $789,000
Great! Which one is better?
Best to use both numbers.
Check to determine how close together these two numbers are. The distance between Average and Median numbers will help you recognize any outliers in your "average." If you eliminate the outlier prices, or Square Footage - any set of numbers, you can see a more accurate picture.
The issue with using only an "average sale price" is the influence of higher-priced homes. If one or more properties were sold at an extraordinarily high or low price, the average is skewed higher or lower as a result. The use of only the average price becomes unreliable out of context.
The median sale price, then, represents the figure at which half of the properties are higher, and half are lower. According to Redfin "The U.S. Census Bureau lists national median and average sale prices for the past several decades, and the Federal Housing Finance Administration uses these and other figures to
create the House Price Index."