Assessing Property Statistics: Median Price

Property statistics are thrown around constantly.

“Median house prices are rising to all time highs…”

“Rental returns decreasing…”

“Property market stable…”

 

But what does any of it mean and where are the important statistics.

To correctly look at a property market you need to understand how you should be assessing property statistics.

Here is the first in our short series on assessing property statistics. Today we will look at median price, and how it is important in assessing property statistics and outcomes.

 

Assessing Property Statistics: Median Price

When we all did mathematics back in school we learnt about an indicator called the median. Just like a median strip is in the middle of the road, a median price is the middle price in a set of data.

That means in the following set:

  • $100 000
  • $400 000
  • $450 000
  • $460 000
  • $1 500 000
  • $1 600 000,
  • $2 000 000

The median price is $460 000.

 

Assessing the Data

Now, this can be a helpful measure to capture a market, but it can also be manipulated. For instance, in this data set the mean or the average price is $930 000 (we will get onto this in a future post). Hence, if an agency wanted the market to sound like it is doing better they could quote averages, if they wanted to make it sound lower, they could quote the median price.

Keep in mind this is a widely skewed set of data to prove a point and property prices are not like this. However, it does illustrate the necessity to be careful when it comes to assessing property statistics.

So, where is median price helpful. Median sale price is a statistic most beneficial for describing market trends rather than real house price changes. This happens as the median price suggests how each end of the market is performing. If the cheaper end sells more the median price will drop, if the more expensive end sells more it will increase.

Take this with a grain of salt, of course if property prices are rising then the median price will rise. But this surface value is not all the median price is suggesting. It also reflects a market trend of properties in each echelon of the property market.

It is, therefore, best to analyse median prices in the long-term to avoid month-to-month skews in the echelons of properties being sold. If the same trend occurs throughout a 6-month or year period it can be reflective of the market as a whole.

Key Notes to Take Away:

  • Look at median prices over the long term
  • Analyse the volume of properties sold in each echelon
  • Correlate these findings to determine an analysis of the market as rising or falling or just trending towards the cheaper or more expensive ends of the property spectrum

 

For more assessing property statistics guides, take a look below.

Assessing Property Statistics: Rental Rates

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