**Median Price vs. Average Price? What does Median Mean?**

by Judith the Floor Plan Lady

FIRST – WHAT IS IT?

The short answer is it is a way of viewing data. When you have a property with an oceanfront view, the “view” of the ocean is different on the ground level patio than it is on the covered 3rd floor balcony off the game room. The ocean hasn’t rearranged itself .. the viewpoint or perspective that you are using to focus on the horizon is different. Median and Average look at (the same) data from different perspectives.

Let’s look at an example… Say 5 people are riding the parking shuttle at IAH on their way to the Terminals. Their yearly income is as follows:

Al 50,000

Bill 60,000

Cathy 55,000

Deb 70,000

Eddie 75,000

Now to arrive at an average yearly income for this group …you add them all together and divide by the number of entries, so it is a total of $310,000 divided by 5 people on the list

= $62,000 is average income for this group.

To get the median, you rank the data in order … so for this group, it would look like this:

Al 50,000

Cathy 55,000

Bill 60,000

Deb 70,000

Eddie 75,000

And the MEDIAN value is the one in the middle .. and in this case it is Bill’s $60,000 that is right in the middle .. there are two values lower ($50,000 and $55,000) and there are two values higher ($70,000 and $75,000). That’s all it means … median means it is the “middle” value for a group of data.

And so far, in this case, the average of this group ($62,000) and the median of this group ($60,000) are pretty close together. But Eddie exits the shuttle at the International Terminal and Fiona gets on. What is the average and median of the group now? Well, it depends on Fiona’s yearly income.

Al 50,000

Bill 60,000

Cathy 55,000

Deb 70,000

Fiona 250,000

Now when we add up respective incomes of this group, the new total is $485,000 and by dividing by 5 you see that the average income for the group is now $97,000. “No way!” you say, “Al still only makes, $50,000 a year and Bill still makes $ 60,000 a year ..etc — claiming the average income for the group is $97,000 may be technically correct — but it is not representative of the group, its just not right!

Okay … let’s look at the median?

Al 50,000

Cathy 55,000

Bill 60,000

Deb 70,000

Fiona 250,000

And in this particular case, you can see the median for the group remains the same. Bill is in the “middle” with $60,000/yr so in this case the median may be the more appropriate statistical measurement **representative **of this data.

SECOND – HOW / WHEN TO USE IT

Citing the average of data is only really reflective if your data is fairly homogenous (grouped closely together). When you have “spoiler” or “outlier” data — in this case Fiona’s income of $250,000 … using the median of the data set instead of the average of the data set may help you get a “truer view” of the data.

So whether you are a Realtor, Home Seller, or Home Buyer —- understand how the data is being compiled, and reported to you. Whether it is days-on-market statistics, or comparable sales pricing for your respective neighborhood .. understand clearly whether the data you have is an average, or a median. It’s important to know, and understand the difference.

*Thanks to* …

Judith, The Floor Plan Lady