Have you commenced the home hunt? If so, you’ve probably been reading a lot about median house prices in whatever areas you’ve been looking. For instance, if you looked at the CoreLogic RP Data Hedonic Home Value Index for May, you might have found the median price in Melbourne is $569,500, or that it’s $463,000 in Brisbane.
Let’s be honest: These figures sure sound interesting, but it’s been a while since you were in maths class. You’ve probably got a bunch of questions on your mind, like…
Remind me again – what’s a median price?
A median is a type of average; specifically, the middle point in a list of values. For the median house price, that means taking all of the houses that have been sold over a particular period of time, lining them up from lowest to highest, and finding the middle. That means half of all dwellings in an area are more expensive than that value, while the other half are less expensive.
Let’s say there were 201 homes sold in Melbourne over the course of a month. The median price would be the one that ranks at 101, because it has 100 other values on either side of it.
Isn’t an average something different?
When people typically consider averages, they’re thinking of the mean. That’s the sum of all values divided by the number of individual values. To take our previous example, this would add together all the sale prices of the 201 homes sold in Melbourne, then divide it by 201.
Why look at the median and not the mean?
A median is useful in cases where there are large discrepancies between values. In such situations, a mean can be misleading. For instance, if there is a relatively small number of houses that happen to be worth an extremely large amount, this can skew the mean and make it larger than it deserves to be. In such a case, a median would be a more accurate representation of house prices, as it might show you that half of the houses sold are worth substantially less.