What’s the Difference Between Median and Average Price?

Many of you have asked this question, and there is a surprising number of people who think they are the same thing… They aren’t! We’ll provide some explanation using some prices as an example.

AVERAGE: This can be determined by adding all the prices together and dividing by the total number of prices available. For example: A neighborhood recently sold five properties at $300K, $400k, $450K, $600k and $700k. To find the average add all the prices together and divide by five. In this neighborhood, the average price home sells for $490,000.

MEDIAN: This can be determined by taking a string of prices in order and selecting the middle most price. In the same example given above, the median price would be $450,000. It is NOT the middle of the lowest price and the highest price, which would be $500,000.

Both are very significant when it comes to pricing a neighborhood. However, it is very important to understand the difference between the two. Here is an extreme example: Another neighborhood has three properties selling for $100K, $100K, and $1M. The average price of these homes comes to $334,000 while the median stays at $100,000.

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