The Median Sale Price
The median sale price rose 5.1 percent in October 2016 when compared to October 2015, according to RealEstateRama and the Iowa Association of REALTORS® (IAR). In the chart above the yellow bars are average prices. The purple bars are median prices.
The median sale price for October 2016 was $145,000 as compared to $138,000 in October of last year.
The year-to-date numbers continue to show a steady year for Iowa residential real estate. Sold properties are up 3.5 percent for 2016 when compared to the same period last year
The days on market (DOM) increased by 5 days from last year. The average days on market in October 2016 was 76 compared to 71 DOM in October 2015.
To borrow from Gilda Radner of old Saturday Night Live fame, “What’s all this talk about Median home prices and what’s wrong with average home prices?
Judy Hedding at About.com wrote an article explaining the difference. First, let’s show how the median price is arrived at:
Here are 11 fictional home prices.
- $100,000
- $101,000
- $102,000
- $103,000
- $104,000
- $105,000
- $106,000
- $107,000
- $650,000
- $1,000,000
- $3,000,000
The median price of these 11 homes is $105,000. Five homes were lower priced and five homes were higher priced. The median, really is the middle value. 50% of values are above it, and 50% below it. So when the data is not symmetrical, this is the form of ‘average’ that gives a better idea of any general tendency in the data.
The average price of these 11 homes is $498,000. That’s what you get if you add up all those prices and divide by 11.
What difference does it make? Suppose you have a fine French chair you brought back from your trip to Europe. It is a memento of the time you spent there celebrating your wedding anniversary. A friend comes over and asks if this chair will support her. She weighs 250 pounds. Oh yes you say it will support the average weight of 498 pounds. She sits and your fine memento collapses into fragments. You meant to say it will support the median weight of 105 pounds.
Knowing how average and median are arrived at gives you information you can act on. Suppose you are looking for a house and your realtor says, “The average price of a house in the Cedar Rapids area is $498,000.” You might get discouraged if you are looking for a house priced at $105,000 and say to your spouse, “Honey, we can’t afford to live here. The average house is way above what we can afford.”
However, if your realtor says, “The average price of a house here is $498,000, but the median house is priced at $105,000.” You could take heart that you will find something in your price range, for of all the houses on the market right now, 50% are priced at $105,000 or lower
Both averages looked at over time, will give you information about the state of the real estate market nationally and locally, but understanding average and median, when referring to housing prices, gives you enough information to make you a happy first time home buyer.
“There is still time to sell your home before the end of the year. Interested buyers are motivated by the slight interest rate increases and predictions that the underwriting process may become less stringent in the future,” stated IAR President Cindy Miller.
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Give us a call today at 319-343-6773 to let us know what YOU need help with!