Average Sales Price vs. Median Sales Price: What's the Difference?

By Indeed Editorial Team

Published November 30, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Housing market prices are generally discussed in terms of the median sales price and the average sales price. The terms may seem interchangeable, but there can be significant differences between each method. There are similarities and differences in calculating these sales figures. In this article, we discuss average sales price versus median sales price, including their advantages and differences.

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What is the average sales price?

The average sales price is a figure that finds the baseline price of all homes sold over a specific period in a specific area. To calculate an average sales price, combine all provided figures and divide the sum by the number of figures. For example, if there are 30 homes sold in a certain neighborhood during one year, the average sales price would be the sum of all homes sold divided by 30. This provides buyers and sellers with a starting price point when buying or selling a home.

The disadvantage of using this figure when listing a home is that one or two homes priced significantly higher or lower than the others can affect the average. For example, out of 10 homes, with eight priced at $100,000 and two priced at $1,000,000, the average home price in this neighborhood is $280,000. If someone with a budget of $120,000 looked at this figure, they may assume all homes in the neighborhood are too expensive, even though their budget exceeds the more common price of $100,000.

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What is the median sales price?

The median sales price is the price where half of the listed prices are higher and the other half are lower than it. For example, if you have 15 home prices, the median price would be the price where seven prices are above it and seven are below it. Finding the median price is straightforward. First, create a list of the prices from lowest to highest, or highest to lowest. Then, find the price in the middle.

For example, if a neighborhood has five homes for sale with prices of $100,000, $150,000, $200,000, $300,000 and $1,000,000, then the median sales price is $200,000. In contrast, the average sales price in the same neighborhood is $350,000, which is a price difference of $150,000.

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What is the mode sales price?

The mode sales price is the price that appears most frequently in a list. For example, if a neighborhood has sales prices of $100,000, $100,000, $200,000 and $400,000, the mode price would be $100,000. This less-frequent measure can still provide useful information. If a neighborhood's most frequent sales price rises consistently, this can show an overall uptrend in home values. It's important to note that because sales prices often differ by small dollar amounts, rounding prices to the nearest thousand or 10 thousand gives more useful information when calculating the mode price.

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Average sales price vs. median sales price

Although both average sales price and median sales price give data about pricing in a certain area, there are several differences between these methods of calculation. These differences include:

Calculation method

The average sales price uses addition and multiplication to determine the sum. The median sales price comes from a list of sales prices organized sequentially, from either lowest to highest or highest to lowest. Both can provide useful information, such as benchmark prices, that potential buyers and sellers can use to determine whether to enter the market.

Buyer interpretation

Because the average and median sales prices often differ, this variation affects buyers' reactions. For example, if an area's average sales price is $500,000 and its median sales price is $200,000, a buyer interested in luxury homes could conclude that luxury homes are causing the average price to be much higher than the median price. Meanwhile, a more budget-conscious buyer can conclude from the median sales price that a significant number of homes are $200,000 or lower. If the only listed price was the average, the buyer may decide the neighborhood is too expensive and overlook homes within their price range.

Types of sales

An important consideration when considering average and median sales prices is looking at the type of sales present in an area. Neighborhoods can include traditional sales, short sales and foreclosures. Traditional sales are the most common type of sales where a buyer and seller agree on a final price. Short sales and foreclosures are sales that typically involve financially distressed homeowners. Both types of sales often result in sales prices much lower than the average or median price in the area.

For example, if eight homes in an area sell for $500,000 each and two other homes sell for $150,000 because of short sales or foreclosures, the average sales price is much lower than the actual average value. Calculating separate average and median sales prices for traditional sales and short sales or foreclosure ensures the different sales types don't affect the resulting figures.

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Advantages of using the average or median sales price

Whether you're buying or selling, it's important to know when to look at an area's average or median sales price. Here are the advantages of both calculations:

Average sales price advantages

A major advantage of using average sales price is the ease of calculation. This figure can also indicate outliers in a neighborhood when comparing the average sales price to the median sales price. If the average sales price is much lower than the median, for example, it may mean the area includes short sales or foreclosures.

Median sales price advantages

Because median price represents the price in the middle of the range, it has the advantage of not being skewed by outlier prices. This can be especially useful in areas with hundreds or thousands of sales within the measured time period. Median prices can also help identify potential buying or selling opportunities. For example, homes under the median price may be bargains, while those above the median may have special attributes, such as greater size or being in a desirable location.

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