The median price data released by the REIV, CoreLogic & other the media throughout the year is not what your property is worth nor is it the average which most people wrongly believe, it is a general measurement used to interpret shifts in value of the middle core in a large sample of data. It is actually surprising how many people confuse the median price with the average. Next time you are at a dinner party, ask your friends what the median price means to them, you will be staggered with their responses but don’t ask a mathematician. At a dinner party I attended recently, the topic of median house prices came up in general conversation…. some were delighted with the increase in the “value” of their homes and others were confused why their homes had gone down even though they lived in virtually the same area. So, after a heated debate discussing why the median price was an inaccurate measure of value, the question was asked…. Does anybody know how the median price is calculated? There was dead silence. Do you know? To begin with, the median prices that are released by the REIV & other statutory bodies throughout the year is not what your property is worth or its value as most people wrongly believe, it is purely one of a number of measurements used to interpret value. It is a summary of a large amount of data as a solitary figure. The median price is the middle figure when all the data is lined up from the lowest to the highest price. If the data has an odd number of figures, then the median price is the middle figure when sorted. If the data has an even number of figures, the median price is the average of the two middle numbers. Obviously, the greater the amount of data, the more meaningful this measurement is. So, now that you know what the median price is and know that it is not what your property is worth,

It’s all about the average!

Confused? Don’t be. Whilst the average (mean) is the easiest measurement to calculate, it is not suitable when the data is skewed. A good example would be when the data contains an abnormal no. of high end of the market sales. This will affect your average but not the median. So, when compared with each other, you can identify how far the data is skewed from what it really should be. The same applies if there is insufficient data but this will cause any measurement to be inaccurate. Another useful indicator is the mode which is the most frequently occurring figure contained within the data (safety in numbers). In summary, none of these measurements are useful in isolation but when compared over a longer period of time, trends can be identified which support changes in the value of property. So, next time the median or average house prices are announced for the quarter, don’t rub your hands with glee or pull your hair out in frustration, compare the data to the previous year, then it will make some sense. And…. next time the topic of median prices is raised, a good question to ask might be… How does the median price for the last quarter compare with the median price for the previous 3 quarters? or What is the average median price for the previous 12 months? Now you’re talking!