What is the Difference Between Median Sales Price & Average Sales Price?

Two we hear frequently are:

  1. How is Median Sales Price calculated?
  2. What is the difference between Median Sales Price and Average Sales Price?

As it relates to residential real estate, the average – or mean – sales price is calculated by adding all home prices, then dividing that by the number closed sales.

The median sales price lists all prices in ascending or descending order and finds the midpoint – where half the homes sold for more, and half the homes sold for less.

Let’s break it down even more. Something like this would not necessarily be uncommon in a given geographic market segment:

$100,000     (foreclosure)
$150,000     (short sale)
$175,000     (traditional sale)
$200,000     (traditional sale)
$225,000     (traditional sale)
$250,000     (traditional sale)
$6,000,000 (estate)

Average:     $1,014,286
Median:      $200,000

Many times, one would think an average would give a more accurate representation of the data. However, as you can see from above, the median is the better option.

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