Interpreting Statistics

As a Realtor, you may be using statistics in your presentations and conversations with clients.  Of the various market statistics commonly reported regarding real estate, the majority use a median value when reporting the results to the public.  As you may remember, the median is the middle value in the sample of values (½ of the sample is higher and ½ is lower).  The median values are typically used to prevent one or two very high value or low value sales from distorting the results. 

Sometimes, the median value can be substantially different than the average value.  To illustrate how the median and average are affected by the original data sample, let’s look at three examples using seven recent sales of properties to calculate a median & average sales price.

Sample #1                               Sample #2                               Sample #3                  

$100,000                                 $100,000                                 $100,000

$100,000                                 $150,000                                 $150,000

$100,000                                 $200,000                                 $200,000

$110,000                                 $290,000                                 $250,000

$200,000                                 $300,000                                 $300,000

$250,000                                 $300,000                                 $350,000

$300,000                                 $300,000                                 $400,000

$1,160,000 Total                   $1,640,000 Total                    $1,750,000 Total

$110,000 Median                    $290,000 Median                    $250,000 Median

$165,714 Average                   $234,286 Average                   $250,000 Average

Average is 50.6% higher         Average is 19.2% lower          Average is equal to

than the median                     than the median                     the median

If you have both the median and average values from the same data sample available, you can have a fuller understanding of the current state of the market.  If the median value is below the average value (example #1), it will typically mean there is a greater concentration of sales at the lower end of the market.  Conversely, when the median is above the average (example #2), there will be a greater concentration of sales at the upper end of the market.  If the market sales happened to be equally distributed, as in example #3, the median and average are equal.