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The Market-Wide Stats are Misleading

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Your Home's Value is NOT Falling

Tupper Briggs

Tupper began his real estate career in 1973 and has earned every accolade from the National Association of Realtors available over the years...

Tupper began his real estate career in 1973 and has earned every accolade from the National Association of Realtors available over the years...

Jul 18 2 minutes read

        

News media have been reporting that home values are down, based on average or median sales prices in the markets they review.  But ‘average price’, determined by adding all the sales prices & dividing by the number of sales, and ‘median price’, which notes the middle price where half of all sales are higher and half are lower, are market-wide figures instead of indicators of an individual home’s value. 


Here’s an explanation:  take three coins from your pocket–three dimes and two nickels.  The average value of the coins is 8 cents (3 @ 10 cents, plus 2 @ 5 cents=40 cents, divided by 5 coins). The median value is 10 cents (two dimes are higher and two nickels are lower in value).  


Now replace one of the dimes for another nickel, so you have two dimes and three nickels.  The average value of the coins is now 7 cents (2 @ 10 cents, plus 3 @ 5 cents=35 cents, divided by 5 coins).  The median value is 5 cents (two dimes are higher and 2 nickels are lower in value). 


If we replace the coins with home sales figures, we see that the composition of sales can affect average and median prices.  In the foothills, less than half of the number of homes (or dimes in the illustration) over $2million have sold this year than last year, making the market-wide average and median prices appear to have fallen.  But homes under $2million are still selling briskly and very close to (or sometimes over) asking price.  So the market-wide stats are misleading and not necessarily indicative of the value of your home.

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