Definition of Median Price
The Median Price refers to the house price that falls precisely in the middle of the total number of homes sold in a specific area within a given period. It is a central value that divides the data set into two equal halves, offering a more stable and representative measure of the market than the average (mean) price, which can be greatly affected by outliers - extremely high or low values.
Examples of Median Price
Example 1:
Suppose last month, the following five houses sold in Gainesville at these prices: $85,000, $105,000, $120,000, $122,000, and $300,000. The median price here is $120,000, as there’s an equal number of transactions above and below this price.
Example 2:
In another scenario, where ten houses sold for $200,000, $210,000, $220,000, $240,000, $250,000, $260,000, $270,000, $280,000, $300,000, and $1,000,000, the median price is $255,000, calculated by averaging the two middle numbers ($250,000 and $260,000).
FAQs about Median Price
What is the difference between median price and average price?
Unlike the average price, the median price is less affected by extremely high or low values and provides a more accurate reflection of the typical price in a housing market.
Why is the median price a preferred statistical measure in the real estate market?
The median price is preferred because it offers a more stable measure by mitigating distortions caused by outliers, thus presenting a more accurate market condition.
How frequently should the median price be calculated to reflect market conditions?
The median price is commonly calculated monthly, quarterly, or annually to track ongoing market trends and provide relevant insights.
Can the median price be used in markets other than real estate?
Yes, the concept of median price can be applied to any marketplace where items are sold at varying prices, including stock markets, retail sectors, and more.
Related Terms
- Mean Price: The arithmetic average of home prices in a given area.
- Mode Price: The price that appears most frequently in a set of data.
- Real Estate Market: A physical or virtual platform where property transactions occur.
- Outliers: Extremely high or low values that can significantly affect statistical measures like the mean.
Online Resources
1. National Association of Realtors
A comprehensive resource for current market trends and housing statistics.
2. Zillow Research
Platform providing extensive real estate data including median home values.
3. U.S. Census Bureau - Housing Data
Government portal for statistical information on housing and construction.
References
- “Real Estate Principles,” by Charles F. Floyd and Marcus T. Allen, detailed information about various real estate terms and market analysis.
- “Modern Real Estate Practice,” by Fillmore W. Galaty, Wellington J. Allaway, and Robert C. Kyle, providing insights into real estate pricing strategies.
Suggested Books for Further Studies
- “Housing Markets and the Economy: Risk, Regulation, and Policy” by Edward L. Glaeser and John M. Quigley – A thorough guide on housing market mechanisms.
- “Real Estate Market Valuation and Analysis” by Joshua Kahr – Detailed approaches for evaluating real estate market statistics.
- “Essentials of Real Estate Economics” by Dennis J. McKenzie and Richard M. Betts – Fundamental concepts and economic perspectives in real estate.
