According to Zillow.com the Denver Metro area has median home listing price of $484,900 and a median selling price of $415,300. What exactly does this mean?
When asked about the difference between the median and average home prices, Jim Smith, owner of Golden Real Estate and author of the column in the Denver Post, “Real Estate Today” explains, “Excuse me for getting a little nerdy here, but it’s important to know the difference between “median” and “average” when studying the real estate market, and here’s why”.
Let’s say an area has five homes sales: one at $300,000, a second at $325,000, a third at $330,00, a fourth at $400,00 and a fifth at $1.2 million. The average sales price would be $522,00, a huge increase over the previous year when all sales were under $400,000. The median sale price would be $330,00, because half of the sales were under that price and half were over.
Days On The Market
Now, let’s look at “Days on Market.” Let’s say those five homes took 1,2,5,7 and 150 days to go under contract. The average days on the market would have been 33, while the median would have been only 5 days. Which is more useful?
These two hypothetical scenarios are precisely what we’re seeing in the real estate market. Luxury homes are selling much more quickly than they have in years past, inflating the average sales price, whereas the median sales price by definition discards both the lowest and highest data points, providing a more accurate picture of what’s happening in the market.
Below is a chart comparing 2017 average days on the market to median days on the market. Homes that take a long time to see – particularly in the current market – are most invariably overpriced. The amount of time these homes languish on the market artificially increases the average days on market. The median days on market is a much better reflection of the market.
Despite this, we continue to hear statisticians and market analysts tell us the changes in the average sale price or the average days on the market instead of giving us the more meaningful median statistics.
Below is a list of major cities within the Denver Metro area and corresponding median home prices.
Arvada – $342,700
Aurora – $264,300
Centennial – $401,400
Denver – $353,300
Highlands Ranch – $427,600
Parker – $417,500
Thornton – $296,300
Westminster – $302,400