Wednesday, February 6, 2008

Real Estate Statistics in the Media 3

There's an old saying in statistics: "torture the numbers long enough and they'll tell you whatever you want to hear." One of my pet peeves is when statistics are thrown around in the media without any reference points, framing, or explanation – they're virtually meaningless. Yet almost everybody I come in contact with wants to talk about a particular number they heard or read recently.

Let's take a look at some of the tricks statistics can play.

In Lesson 1 we looked at Median Home Prices, and in Lesson 2 we looked at Average Home Prices.

Lesson 3


Median and Average working together


If you ever hear a news story which tells you the Median AND the Average, you can have a much better understanding of what's really going on in the market. These two statistics complement each other by telling you something about the distribution of the numbers behind the statistics. Here's how:

If the Median Home Price and the Average Home Price are similar, then the list of homes is fairly evenly distributed.

If the Median Home Price is much smaller than the Average Home Price, then there are more smaller homes selling, but the higher-end homes are really expensive.

If the Median Home Price is much higher than the Average Home Price, then there are more higher-end homes selling, but the lower-end homes are very low-end.

Here are some examples:






























































Even DistributionMedian < AverageMedian > Average


  1. $200,000




  1. $150,000




  1. $125,000




  1. $250,000




  1. $175,000




  1. $140,000




  1. $300,000




  1. $225,000




  1. $150,000




  1. $325,000




  1. $250,000




  1. $160,000




  1. $350,000




  1. $275,000




  1. $375,000




  1. $375,000




  1. $350,000




  1. $400,000




  1. $400,000




  1. $400,000




  1. $425,000




  1. $450,000




  1. $875,000




  1. $450,000




  1. $500,000




  1. $950,000




  1. $500,000


Median: $350,000

$275,000



$375,000


Average: $350,000

$405,556



$302,778



It's pretty clear to see that if you have just a little bit more information, you can have a much better understanding of what has happened in the marketplace. And this is just the tip of the iceberg; there are other statistical numbers which can help clear up the picture even further.

That's why, whenever I do a market analysis, I try to explain what the numbers mean, rather than merely quoting some numbers for you to wonder about on your own.

I hope this helps you understand a little bit more about the terms Median and Average Home Prices, and how they can work together to help give you a better understanding of the numbers they're trying to explain.

Your statistical analyst Realtor,

Chris Butterworth

[tags] average home price, real estate statistics, Fletcher Heights [/tags]