Definition
Average price is total sales divided by number of sales. It's useful but can be skewed by outliers. One mansion sale can push average price way up, making the market appear stronger than it is. Median price is more reliable.
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Average price is calculated by summing all sale prices and dividing by the number of sales. While straightforward, average price can be distorted in markets with significant price variation—one luxury home sale can dramatically increase average price beyond typical neighborhood values. For market analysis, median price is often more meaningful than average price. Average price trends can also be misleading if the mix of properties sold changes (fewer condos, more single-family homes, for example).
Pro Tip
Focus on median price rather than average price. Median resists outliers and better represents typical market values.
Example
In a neighborhood with sales at $300,000, $400,000, $420,000, $430,000, and $600,000, the average price is $430,000. However, median price of $420,000 better represents typical sales.