If you have been reading about the real estate market, it is very difficult to ignore the statistics surrounding the housing market. It can also be difficult to understand and interpret what is meant when statistics are being reported.
Remember that math class so very long ago when you learned about different types of averages?
For a refresher, there were three types that we all learned:
MEAN: (or what we commonly call AVERAGE): Add up all the values and divide by the number of items.
MEDIAN: Arrange all the values in either ascending or descending order and select the one that is exactly in the middle.
MODE: This is the most frequently occuring value in the range of numbers.
All three types of averages can be useful, depending on the situation. But in real estate, medians often give a better picture of what is actually going on. One closed sale at $900,000, for example, can really distort a mainly $200,000 housing market, showing a much higher number than really occurred.
Here's an example. Listed below are all the properties that closed in Ellington CT during November 2009:
- 25-28 Green Street $100,000
- 27 Elizabeth Street $128,000
- 41 North Park Street $192,500
- 3 McKnight Circle $210,000
- 44 Ludwig Road $240,000
- 21 Kibbe Road $293,000
- 7 Daisy Lane $400,000
- 1 Jonathan Drive $470,000
- 10 Overlook Pass $620,000
- 2 Monticello Circle $647,301
If we took the average price, it would be $330,080.
But if we took the median price, it would be $266,500. That's quite a difference. And most of the time, the median price will reflect a more accurate picture of what is going on in the market.
Another statistic to be wary of is Days On the Market. Most of the time, the average DOM is reported, but again that might not show what is really going on. One stubborn over-priced house that has been on the market for 365 days will skew all the other data. It may be worthwhile to look at median DOM.
If you would like to know median prices and median days on the market in your area, contact me. I would be glad to provide that information.
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Peggy Chirico, REALTOR®
Serving the Greater Hartford Area
Prudential CT Realty
peggychirico@gmail.com
860-748-8900
If you are buying or selling a home in Hartford County or Tolland County, please call me, email me, or visit my website. I would be happy to help you with your home search or provide a market analysis for your home.
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It is interesting how we track a statistic as the basis to home values which doesn't accurately show the value of similar homes. In lean times, that median will drop as people buy smaller more affordable homes, and the converse true in good markets. But in lean times it doesn't mean that homes are actually decreasing in value (it could), in fact a median could go down and property values actually increase.
Thanks for your comments, Jon. I agree that we should all read statistics with a grain of salt (or two or three). I also think that recent publicity (ad nauseum) about median prices falling is open to interpretation too. The median prices of closed homes could easily have been a reflection of the fact that the first-time homebuyer tax credit brought about a rash of sales in the lower price ranges.
Peggy.. Thanks for the refresher coures. It is always good practice to stay current on the housing market, and how people dirive certain statistics from them.
Hi Valerie - Thanks for checking it out!