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What is the meaning of the median sales price?

posted by: Kevin Kearney in Community

I was recently quoted in the Marin Independent Journal with regards to the median sales price and I have had many conversations recently with clients inquiring about their “gain”.  Here is a link to the article which does a good job of covering the topic, but I thought it worth going into more detail.

Median as defined by Wikipedia: The median is the numerical value separating the higher half of a data sample, a population, or a probability distribution, from the lower half.  The median is of central importance in robust statistics, as it is the most resistant statistic, having a breakdown point of 50%: so long as no more than half the data is contaminated, the median will not give an arbitrarily large result.

Now this is a mouth full.  The more important thing to note above is the last sentence.  It is a pretty reliable number statistically.  However, there are a few problems with using the number to evaluate the specific value of a home in a market:

1.  If the number used is broad enough to be useful, it may not be relevant to a specific neighborhood or a specific side of a street – one side with great views and the other with no views.

2. If it is not relevant to specific neighborhoods, then using the data on a specific home in the neighborhood could also give a false number.

Again, there are many items to factor in: did the buyer pay the market price when purchased?  Or did they get bid up and over pay in that market to get the home?  How much have the upgraded the home?  Applying the median increase to an inflated price will also get an inflated number and applying it to the basis of the house plus improvements may not be right either.

The bottom line is that the median is a good gauge on what is going on in the overall market, but to know the actual value in current market, sellers must look at current sales within the last 6 months (and sometimes more recent if a fast moving market) to determine what the home might sell for.  There are only two reasons a home does not sell in a given market: Marketing or Price.  There are other factors including condition and location, but those are taken into account in the price.  Call me today if you would like more information on the current market and information about how my team will get you top dollar for your home.   Are you ready?  Call 415-297-3874.

 

 

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