All they talk about on the news is how housing becomes less and less affordable. The median price is climbing up like crazy everywhere. But what is a median price, why look at it and how it’s different from average price? Well, that’s really easy – here’s an example:
Suppose we take 7 houses that were sold and sort their prices from lowest to highest (in thousands of AUD)
250, 252, 278, 286, 302, 325, 339
Median price here is 286, because it’s in the middle of range – 3 prices are lower and 3 prices are higher than it.
How median price is different from average price? To calculate average price we have to sum all of the prices and then divide by the number of houses, so that
Average price = (250 + 252 + 278 + 286 + 302 + 325 + 339) / 7 = 290
What median price shows?
It shows who rules the market in a certain place (suburb or area) at certain time (i.e. 3 or 6 months or a year): if there are more people buying expensive houses than cheap ones, it will go up, but if there are more people buying cheap property than expensive – it will go up.
To see some real life examples for median house prices, look at this page from REIV site - most people think they are a very reliable source of real estate figures in Australia
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[...] the boundaries of your budget. So basically you’d make a list of all the suburbs with their median prices and cross out those where median price is above your budget. Some reports list the lowest property [...]