If you are following real estate market stats, you will see various terms thrown around – it’s the real estate jargon that you may not totally understand. That’s okay! And that’s why we are here to answer questions and help you understand the information so you know the best time to react and take advantage of the real estate market whether buying a home or selling a home.
So, what’s the difference between the average home price and the median home price?
Well, let’s start at the beginning. First of all, when you are seeing these real estate statistics, they are typically referring to homes that have sold (closed). The prices are based on the final agreed price for the home, not necessarily the listing price. Currently in the El Paso County market, we are seeing over 99% of homes sell for at or over the list price (year to date). However, there are exceptions where the home sells for less than the listed price.
But for this conversation and industry stats, we are only looking a SOLD homes (meaning, they have made it through the Under Contract phase of the real estate contract and gone to a successful closing).
So, let’s start with the AVERAGE PRICE. It takes us back to elementary school and most of us don’t remember the things we were tested on in 5th grade. When you are a looking at the average (in any industry or calculation) here’s the way to do it:
TAKE THE TOTAL SALES VOLUME AND ADD IT TOGETHER. So if you have 100 homes selling in a specific month, add together all the dollar amounts of the sales of the 100 homes. If each home sells for $300,000 you’ll calculate $300,000 + $300,000 +$300,000….100 times. Obviously, sales are all over the board in reality. So you’re adding together the $30,000 home sales with the 3 million dollar home sales, etc.
- TAKE THE TOTAL OF ALL SALES AND DIVIDE BY THE TOTAL NUMBER OF SALES. In our example, after you’ve added together all the different amounts, you’ll divide by 100 since there were 100 homes sold in the period you’re trying to figure out the average.
- THIS TOTAL GIVES YOU AVERAGE HOME SALES. Currently in our market, there are about 1200 single family homes selling every month in El Paso County. By taking all the prices of those 1200 single family homes, then dividing that total number by 1200 you’ll get the average home price. In April 2018, our average sale price for single family homes was $351,698.
So, what’s the MEDIAN PRICE? The median is the “middle price” – think of it as the median on the highway. It’s the middle!
- TAKE ALL THE HOME SALES AND RANK THEM SMALLEST TO LARGEST. Again, we use the same stats of sold homes (those homes at $30,000 all the way up to the top dollar sale of 3 million).
- TAKE THE NUMBER IN THE MIDDLE OF THE TOTAL SALES. You literally want the middle number, so you could check off one number from the bottom of the list, then one number at the top of the list and continue until you reach the middle number. If you have an odd number of sales, it’s perfect and you take the middle number. With an even number, in order to find the exact median, you’ll take the average of the middle two sales.
- THIS GIVES YOUR THE MEDIAN PRICE. Again, in our current market, the median is higher than the average. Our median sales price in El Paso County for April 2018 was $305,000.
Also, make sure you’re paying attention to the data you’re looking at. Some stats might only show a specific area, like a neighborhood. Others may show all of El Paso County, and others may show an even larger area including all of Pikes Peak MLS, which includes multiple counties.
Statistics for our region are usually broken down further, showing single family homes and patio homes as one total, and condos and townhomes as a separate total.
Consider the time period as well, whether the information you’re considering is based on Year-To-Date, quarterly stats or simply totals for a specific month.
Overall, we don’t expect you to figure this all out yourself! Contact your favorite experienced agent to help explain and analyze the data on your behalf. We can help you understand trends for your neighborhood, city section, larger city, or your MLS. We also have data for the entire State of Colorado, so you can see how your home is valued compared to other counties throughout the State.
Watch for our newsletter every 2 months with local real estate stats, or contact us anytime for an in-depth valuation.