What is the difference between Median and Mean (average) home prices?
January 19th, 2008
Median Home Price
The median home price divides the real estate market into two equal halves. One half of all homes in the market were sold above the median home price, while the other half were sold below the median home price. For example, the median home price in Willow Glen for 2007 was $850,000, meaning that half of all homes sold in Willow Glen were priced above $850,000, and half were priced below $850,000. According to the California Association of Realtors the 2007 median home price in California was $488,640.
The median home price is one of the most common measurements used to compare real estate prices in different markets, areas, and periods. It is said to be less biased than the average since it is not as influenced by the top 2% of homes sold. For example, the average home sale price in Willow Glen was $939,318 in 2007, compared with a median home price of $850,000 for the same time period.
Mean (Average) Home Price
The average home price is the sum of prices of all homes sold in a certain area in a certain period, divided by the number of properties sold in the same area in that period. For example in the area of Willow Glen there were 49 single family homes sold in the month of January of 2007. The sum of these properties totaled $42,342,664. This number is then divided by 49, which equals $864,136. Which makes the average home price for a single family residence in Willow Glenn was $864,136 in January 2007.
Sales Price Per Square Foot
Real estate prices are also by the price of each square foot. This allows for a better comparison between differently priced homes as well as homes of different sizes. In this pricing measurement method, the median or average home price is divided by its square footage. For example, a 1,700 sq. ft. home was for sale for $650,000. To find the price per square foot, the price of $650,000 is divided by the square footage of 1,700. The result, $382.35, is the price per square foot for this particular home.
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