Median Price Dips Again -- But What Does That Really Mean?
In the St. Petersburg Times for Thursday, October 25th, the main headline in the business section reads "Home prices tumble again" and the subhead is "The median price in the bay area for an existing home is poised to dip below $200,000".
What follows is a very well written article by Christina Rexrode about how the median price of existing homes has fallen 9.6% from September 2006 to September 2007 -- from $222,100 to $200,700. She goes on to urge sellers to reduce their prices if they hope to make a sale -- very good advice.
But what is the median price? What does median mean, anyway?
Probably a lot of people confuse median with average, but they are not the same thing.
Recalling that troublesome course in statistics that I took in college, the median is the number separating the higher half of a sample from the lower half. I find it useful to think of the median as the half-way point. Clearly, that is different than an average.
So, when we talk about the falling median price of homes, what we are really saying is that people are buying less expensive homes and not buying more expensive homes. In the current case, half the people who bought houses paid $200,700 or less and the other half paid $200,701 or more. A year ago, half paid $222,100 or less and the other half paid $222,101 or more.
So today, buyers are purchasing less expensive properties. That's a market fact supported by the median data. What it does not necessarily mean is that they could have bought the same property today for 9.6-percent less than they did a year ago.
So, if you're a seller, here's what all this means to you in selling your property: you had better start thinking in terms of getting your price lower. The falling median data supports a drop in asking prices. Or, as the Times staffer wrote in her story, "As sales continue to plummet ... sellers are waking up to the fact that they'll have to lower their prices if they hope to get rid of their property. That's a point they didn't grasp last year."
Well, I don't know if sellers grasped it last year or if buyers were still willing to pay more for property then, but this year's falling median price clearly shows the direction buyers are headed and only an uninformed or unmotivated seller will continue to try to get "top dollar" or "maximum ROI" or "my number" when selling property today.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
What follows is a very well written article by Christina Rexrode about how the median price of existing homes has fallen 9.6% from September 2006 to September 2007 -- from $222,100 to $200,700. She goes on to urge sellers to reduce their prices if they hope to make a sale -- very good advice.
But what is the median price? What does median mean, anyway?
Probably a lot of people confuse median with average, but they are not the same thing.
Recalling that troublesome course in statistics that I took in college, the median is the number separating the higher half of a sample from the lower half. I find it useful to think of the median as the half-way point. Clearly, that is different than an average.
So, when we talk about the falling median price of homes, what we are really saying is that people are buying less expensive homes and not buying more expensive homes. In the current case, half the people who bought houses paid $200,700 or less and the other half paid $200,701 or more. A year ago, half paid $222,100 or less and the other half paid $222,101 or more.
So today, buyers are purchasing less expensive properties. That's a market fact supported by the median data. What it does not necessarily mean is that they could have bought the same property today for 9.6-percent less than they did a year ago.
So, if you're a seller, here's what all this means to you in selling your property: you had better start thinking in terms of getting your price lower. The falling median data supports a drop in asking prices. Or, as the Times staffer wrote in her story, "As sales continue to plummet ... sellers are waking up to the fact that they'll have to lower their prices if they hope to get rid of their property. That's a point they didn't grasp last year."
Well, I don't know if sellers grasped it last year or if buyers were still willing to pay more for property then, but this year's falling median price clearly shows the direction buyers are headed and only an uninformed or unmotivated seller will continue to try to get "top dollar" or "maximum ROI" or "my number" when selling property today.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 3:48 AM
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