Real estate statistics are a great way to take the pulse of a particular market but knowing what the numbers mean, can sometimes be confusing. Here’s the difference between average and median price.
Average: is the set of data added together divided by the number of data that you have.
Example: $250,000, $280,000, $285,000, $350,000, $500,000; add them up equals $1,665,000. Divide $1,665,000 by 5 and answer is $333,000.
Median: is the exact middle number that exists in a set of chronological (smallest to largest) data.
Example: $250,000, $280,000, $285,000, $350,000, $500,000; the middle number is the third number, "$285,000" which is the median. In this case the median has exactly two numbers on each side of it. Now, if there is no middle number, such as $250,000, $280,000, $280,000, $285,000, $350,000, $500,000 then average the two middle numbers, which would be an average of $280,000 and $285,000 which is $282,500.
Average and median are both measures of central tendency, but the average can be skewed by very large or very small data. Let’s take a look at the cottage properties on the lakes in Huntsville, Ontario (Fairy Lake, Peninsula Lake, Lake Vernon, Mary Lake) for the past three years. You’ll notice a substantial increase, 20.6% from 2011 to 2012 because of a highest price sale ever was recorded at $2.4MM on the Huntsville Lakes, but the median price only rose 12.5%. Highest price previously recorded was $1.8MM which sold in 2008.
I tend to focus more on the median statistics, because the median is not affected as much by those very large or very small sales data. For some reason the average seems to be more popular than the median. I think it is because it is higher, and it makes the point that many homes are still overpriced. It is probably not a huge deal in the grand scheme of things, but here on Lake of Bays, Muskoka there’s a cottage property for sale at $8.5MM. I ran the numbers and the average price for a cottage on Lake of Bays for 2012 is $848,677 and the median price is $737,500. If that $8.5MM cottage property did sell in 2012 the average price for Lake of Bays would go up to $1,072,361 an increase of over 26%, while the median price only increases to $750,000 which represents an increase of only $1.7%.
If you are interested in more statistics or have questions about the real estate market in Muskoka, don't hesitate to email or call my cell anytime.