Check Google Page Rank

Link,Tweet, Digg, Facebook, Tumble - whatever - Raise the Rank!

Median vs. Average Real Estate Sales Prices

When the Real Estate Board of Greater Vancouver (REBGV) reports real estate sales prices and real estate sales statistics they sometimes report average prices and sometimes report median prices. The following is the explanation of methodology that accompanies the quarterly statistical reports, but it is also useful for other REBGV stats:

The data collected is derived from listings which are sold through the Multiple Listing Service of the Real Estate Board of Greater Vancouver and is restricted to that jurisdictional area served. The data sources are believed reliable but the Board assumes no liability for its accuracy.

The Residential units, which have been identified as Single Family Detached Dwellings, hold title as Freehold, and have been sold during the designated period of time are sorted by Major Area.

The Condominium units which have been identified as Condominium and hold Strata Title as Freehold, having been sold during the same period of time, are treated in the same manner but shown separately.

Should the unit count be less than twenty for any area, then the count is considered “Insufficient number of units” to analyze and no figures will be shown for that category.

CAUTION ADVISED

The following statistical data should be interpreted with caution. Perceived changes in sales prices may be influenced in a variety of ways. Some of these are:
A. The statistical data included is based on sales processed through the Multiple Listing Service. Inasmuch as some areas make greater or less use of the Multiple Listing Service, the extent to which the data can be expected to be a representative sample of the area may be limited.
B. It is impossible to examine each sale with respect to its correct classification; e.g. a converted revenue property might from time to time be included as a single family residence.
C. Shifts in demand, based on fluctuations of interest rates, may occur amongst price groups.
D. A change in the number of sales in any given area will normally influence the median price reported.

EXPLANATION OF OUTPUT

For the purposes of this statistical summary the Real Estate Board of Greater Vancouver’s computer has been programmed to array all sales in a given area from the lowest to the highest price. The price ranges therefore are based entirely upon the actual sales occurring in a given area during a given period of time.

Once all the sales are arrayed in order of price, the list is divided into four price groups, identified as A, B, C , and D in accordance with the number of sales; i.e. if there are forty sales in the range, it is divided into four quarters with each group consisting of ten sales.

For the purpose of this report, the median sale price shown for each price group is an actual sale at or immediately adjacent to the mid-point in each price group.

In the case of an even number of sales, the median price is highest price in the lower half of the price group (number 5 in the example below).

If the total number of sales is an odd amount, the mid-point sale is taken to be the median (9 sales, Sale number 5 represents the median).

The median, as a method of obtaining average value, has been selected because it is only marginally effected by sales occurring at the lower or higher extremities.

The following example demonstrates the advantage of using a medium over arithmetic average.

Sale No.1………………………$10,000
Sale No.2……………………….10,000
Sale No.3……………………….20,000
Sale No.4……………………….20,000
Sale No.5……………………….45,000 Median Sale Price $45,000
Sale No.6……………………….50,000
Sale No.7……………………….60,000
Sale No.8……………………….60,000
Sale No.9……………………….60,000

    Sale No.10………………………60,000

TOTAL:………………………..$395,000. Arithmetic Average $39,500

Clearly the arithmetic average is strongly influenced by the extremely low values of sales no. 1 to 4, and does not provide a realistic indication of the average value.

Leave a Reply

You must be logged in to post a comment.