Average Price
Definition and meaning of Average Price in real estate.
The average price in real estate is a statistical metric calculated by adding the sales prices of all homes sold in a specific area during a given period and dividing that total by the number of sales.
In more detail
This figure provides a general overview of market pricing trends but can be easily skewed by a few exceptionally high or low transactions. Real estate professionals use average price alongside median price to analyze market health and guide buyers and sellers. When a market has several multi-million dollar luxury home sales, the average price will rise, potentially giving a false impression that the overall market is more expensive than it is. Conversely, a high volume of foreclosures or fixer-ups can pull the average price down.
Key facts
| Category | Buying & Selling |
|---|---|
| Also known as | Mean sales price |
| Skewed by | Extreme high or low sales values |
| Used for | Tracking broad real estate market trends |
A real estate agent calculates the average price of homes sold in a neighborhood last month by summing the sales prices of five homes and dividing the total by five.
Frequently asked questions
Why is median price often preferred over average price?
Median price represents the middle point of all sales, which prevents it from being skewed by a few very expensive or very cheap home sales.
How can buyers use the average price to their advantage?
Buyers can track the average price over several months to determine if the local market is generally appreciating or depreciating in value.