Median is the midpoint between high and low. Median is not the same as Average.
We watch all of the on-market properties – the homes currently listed for sale – in each of the cities and zip codes that we cover across the country, 20,000+ zip codes.
The real estate industry generally uses “Median Price” instead of “Average Price”.
Because a couple of high-end or low-end properties in a single zip code or city can skew the Average Price pretty quickly, using Median gives a more accurate depiction of local price levels.
Median Price is often a very good proxy for indicating real-time market activity.
Sellers in a market, with the help of their local real estate agent, will price their home according to other similar homes in that market. While this isn’t a perfect science, most agents and sellers tend to price their homes in close to the price where it will eventually sell. As the median price changes, this can indicate a couple of key market movements:
1. A rise in median price means that sellers are responding to more sales in their local area which means that the local market might be “strengthening” or getting “hotter” – favoring sellers, so they will ask more for their home. A fall in the median price might indicate the opposite – few homes selling at the current price levels which causes homes on the market to drop their price (see our post on Percent Price Decreased here – viewtopic.php?f=7&t=11) and for new homes on the market to price more aggressively.
2. A rise in median price could also mean that homes at the lower part of the market are selling and leaving the market. This means that the remaining homes on the market are at a higher price point, which causes the aggregated median price to rise.