Median price vs Average price
With the media spotlight on housing prices across the country, I noticed the usage of median price used much more extensively than average price and wondered about the distortion that could be created. What is important to remember is that median price is the middle of all the numbers while average adds up all of the numbers and then divides by the number of numbers. (Was that using the word numbers too many times?)
A couple of favorite quotes: There are three kinds of lies—-lies, damned lies and statisics. (Mark Twain) or “Figures don’t lie…Liars figure” (Anonymous)
I’d prefer to see the raw data yet some insist on presenting them to support their point of view. Here’s an example of statistical manipulation of the following raw data: 10, 15, 20, 25, 1,000, 2,000 5,000. The median is 25, the average is 1153. Depending how one wants to spin the story, the median or the average could be selected. Credit to sellsius° for pointing this out.
Now, with that taken care of, let's get on to some statistics.
Home prices: Record drop in October
Median price sinks 3.5 percent from a year earlier, trade group see more price declines ahead.
By Chris Isidore, CNNMoney.com senior writer
November 28 2006: 2:59 PM EST
NEW YORK (CNNMoney.com) -- The price of existing homes sold in October fell for the third straight month and posted the biggest drop on record, an industry group said Tuesday, adding it expects weakness in pricing to drag on into next year.
The National Association of Realtors said that the median price of a home sold in October was $221,000, the same as in September, but down 3.5 percent from October 2005. Read the complete story.
First of all, note the big scary headline, prices drop by record amount. The good news, which the media generally doesn't really like to talk about and is somewhere deep in the story, is the mention that unit sales were up which was a surprise to the many who were expecting a drop.
Inventory remains high so how could prices continue to escalate in that environment. The laws of supply and demand rule, not emotions. Sellers have to take into account the competition they face when selling their homes and buyers have lots of choices. Priced right, homes are selling. In Charleston, we are running slightly below last year in terms of houses sold, prices are stable (actually up a bit) but the troubling aspect is that inventory is double last year. I'll be adding more charts and raw data soon.