Understanding Real Estate Statistics

Understanding and analysing property stats can be one of the most daunting aspects of monitoring the property market if you are intending to buy or sell.

Let’s face it  – statistics are rarely fun, but on the other hand they are an important part of your property research.

Before you can completely comprehend the stats that are bandied about in media, on the radio and online, it is important to understand what some of the most common terms used stand for and know the difference between a mean house price and a median sale price.

The most commonly used measurement is ‘median’ because it gives the most accurate reflection of how properties are performing in suburbs, regionally and nationally.

So, what is the difference between the means and medians?

Mean (average)
The mean is what most people think of when you tell them to work out the average. If you have five houses that sold, you would add all the values together then divide the sum by 5. Using this measure to determine prices can be a bit deceiving, as the mean is often skewed if a house in the area sold for a high or low price compared with the others.

For example: if you had five properties that sold for $375,000, $395,000, $400,000, $425,000 and $1.5m, the mean would be $619,000.

Median sale price
The median sale price is the middle price that properties sold for. Instead of adding all the values of the houses together, you order them then pick the one in the middle of the list. So, if our five house sold for $375,000, $395,000, $400,000, $425,000 and $1.5m, the median sale price is $400,000.

As you can see from the above examples, by using a mean instead of the median, you can get a very different view of how your property market is performing. Make sure you understand what measurement is being used when you are researching housing data and statistics.