Some people have the misconception that ”average home prices” is the same as “median home prices” when they are actually quite different. Let’s take a closer look at these terms.
Average Home Prices
Average home price is exactly what the term means… the average price of a number of houses. In a simple example, we have 5 houses with sales prices of $100,000, $200,000, $300,000, $400,000, and $2,000,000. To calculate the average home price of the houses, we add up the individual home prices to get a total of $3,000,000, and we divide it by the number of houses (5) to come up with the figure of $600,000. Is it a good indicator of the value of the houses?
Median Home Prices
Basically, the median home price is the price of the home in the middle of the group. In this sense, it does not involve any calculation at all. Using the previous example, there are 5 houses so the median home price is simply the price of the 3rd house which is $300,000. For all sample sizes, the median home price provides an indication of the middle-range home prices.
Now, you should know the difference between average home prices and median home prices. If you have some questions about buying or selling real estate, you may contact top Maryland REALTOR John Day for a discussion.