What is the difference Median Average versus Average

Recently I was asked by one of my Tahoe Buyers what was the difference is between the Average Median Average versus Average Sales price? Was there really a difference when looking at market sold pricing averages in the Lake Tahoe – Truckee market?

These were great questions, as I often provide both the Median Average and the Average sold price data in some of my area market reports. Having both measurements can be very helpful for my buyers and sellers to use when comparing sales data.

Let’s start with how each average is mathematically calculated.

How do you calculate the “Average Median” (middle) Home Sale Price?

The Average Median Home Sales Price is the middle value in the list being considered.
- If there is an odd number of sales, the sale in the middle of the odd range is the median average.
- If there is an even number of sales, the median average is the average of the two entries in the middle of the range.

Median Average Example:

In our example we’ll look at a lakefront condominium development. There have been three sales have happened in the year. It’s a lakefront development so the prices can really vary from a small, non-lake view property to a large lakefront unit, so we have a wide value range. We often see these wide swings in home sales, so this is a good example for our area.

The sales are as follows:

$562,500
$700,000
$2,100,000

In this example, the Median Average Condo Sold Sale price is $700,000. It’s the middle value in the range one half of the data is above, and one half is below. It’s an odd number so it stands out immediately.

If our example had been four sales instead of three:

$562,500
$700,00
$800,000
$2,100,000

The two values in the middle $700,000 and $800,000 would then be added together, then divided by two. The median average in this example with four sales would be $750,000.

Same situation and data for three sales – what is the “Average” Home Sales Price for this same group?

How do you calculate the “Average” (mean) Home Sale Price?

The average (mean) is calculated by adding up all of the values in the group, and then dividing that sum total by the number of values in the group.

The sales are exactly as our first example, and they are as follows:

$562,500
$700,000
$2,100,000

In our example the Average Sum Total is $3,362,500 (the above three sales added together) divided by 3 (3 sales) = $1,120,833 Average Sales Price

When working with a small volume of sales, seeing both the median average and the average compared to each other are helpful to determine over-all market conditions.

In our Tahoe neighborhoods like our lakefront condo development example where the sales prices can really vary we have the following to compare:

$700,000 Median Average Sales Price
$1,120,833 Average Sales Price

The large average price difference tells us in this example that this complex may be more expensive than the median average sales price would lead us to believe.

The Median Average Sales Price could also be lower than the Average Sales Price, which would indicate that the overall area may not be as expensive as the Median Average leads us to believe, or it could just be the type of sales that have occurred that year.

Typically we would like to see the Average Sales Price very close to the Median Average Sales Price which would indicate a fairly consistent value range for that condo complex, or subdivision, but when only a few sales are available, that may not be possible.

In any given year, sales prices can be skewed up, or down depending on the sales mix and number of sales.

In real estate, typically the Median Average Sales Price is what is used in reports, however, when working with a small group of sales (small data sets) buyers and sellers should be open to looking at more than one measurement to confirm market and area values.

Median Average Sales Prices or Average Sale Price – Two Different Methods!

If you have questions on any of my market reports, or on how data is presented, please give me a call at 530.414.1260!

Thinking about making Lake Tahoe, California your second home? Check out the homes that are for sale here:

Want to see what condos are for sale in Lake Tahoe? Here are the current listings:

For all of your Tahoe real estate needs –

Laura A. Allen | 530.414.1260 | Laura@TahoeLaura.com
BROKER ASSOCIATE, Tahoe Real Estate Agent
CalRE# 01473598
Coldwell Banker, Tahoe City, CA CalRE#01908304

All information is deemed reliable, but is subject to change, and/or correction without notice.

What is the difference Median Average versus Average