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What is Median Price?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 21 July 2014
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Median price is one way that home prices can be measured to evaluate all home prices or home values in a specific area. The median price should not be confused with mean price or average price. Though median and mean are both measures of central tendency (meaning they both evaluate how data clusters at the center), they are not calculated in the same way.

To get the median price in a specific housing market, realtors may compile lists of all homes for sale, ranking from lowest to highest price. The house that falls in the direct middle of that list of homes gives the median price for the area. Essentially this price tells buyers that half of the homes will be less than the price and half will be more than it. It doesn’t tell buyers how much less or more.

This is why realtors may also comprise lists that evaluate mean or average price. In this scenario all home prices are summed and then divided by the number of homes for sale, giving average home price. Sometimes mean price is a better measurement of what people can expect to pay for a home in a specific area.

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There can be a number of uses for price information based on medians. Home medians can be evaluated over time to see if they are falling or rising. Consistent decline in median prices in many different areas at once can indicate a housing crisis, such as the one encountered in the US economic downturn of 2007-2008.

Potential homebuyers are not the only people evaluating median prices. Real estate agents, lenders, and those selling their homes also look to this figure to determine how to price homes or how much homes should be worth. Breakdown of median prices can be more extensive. For instance a person could look at the median price of homes within a specific area, having a set amount of bedrooms, and possessing a certain square footage amount. The median price of condos, for instance, is figured separately from houses because condos are usually much lower in cost.

Another use of median price can be applied to home rentals, and may help renters and landlords determine fair or market price rent. Again, the median would mean that half of all rentals were less than and half were more than the price listed as the median. Understanding mean price could also be important but extremely low priced rentals or high priced rentals, which can be called outliers, could skew the average results and make average rent appear much lower or higher than it truly is. Knowing both mean and median prices may be most desirable in determining acceptable rent amounts.

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