Example of Median Prices

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How Exact is the Median Value of Something?.

We see median prices for various things being quoted, such as Median House Prices, Median Wages etc., but exactly how exact are these figures.


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They may not be an exact guide, in fact, they can in some cases give very wrong information, especially with Median Property Prices.

Example:

  • A 5% actual rise could be a drop of  almost TWO percent in the median value, or
  • A 5% actual rise could be a rise of almost TWELVE percent in the median value.

Confused?  Read on…

Take this example of 13 houses sold in one period for the following prices:

House 1 sold for $300,000
House 2 sold for $330,000
House 3 sold for $360,000
House 4 sold for $390,000
House 5 sold for $420,000
House 6 sold for $450,000
House 7 sold for $480,000
House 8 sold for $510,000
House 9 sold for $540,000
House 10 sold for $570,000
House 11 sold for $600,000
House 12 sold for $630,000
House 13 sold for $660,000


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The median property price is $480,000

Then, a while later, after all prices rise by 5%, most properties sell, at the higher price, but the top two highest price properties do not sell.

House 1 sold for $315,000
House 2 sold for $346,500
House 3 sold for $378,000
House 4 sold for $409,500
House 5 sold for $441,000
House 6 sold for $472,500
House 7 sold for $504,000
House 8 sold for $535,500
House 9 sold for $567,000
House 10 sold for $598,500
House 11 sold for $630,000

The median property price is now $472,500 a drop of 1.56%, even though prices actually rose by 5%.

If people could afford more and the lowest two properties didn’t sell, the change would be:

All prices rise by 5%, but the lowest priced properties do not sell.

House 3 sold for $378,000
House 4 sold for $409,500
House 5 sold for $441,000
House 6 sold for $472,500
House 7 sold for $504,000
House 8 sold for $535,500
House 9 sold for $567,000
House 10 sold for $598,500
House 11 sold for $630,000
House 12 sold for $661,500
House 13 sold for $693,000

The median property price is now $535,500 a rise of 11.56%, even though prices only rose by 5%.


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