{"id":6262,"date":"2009-07-08T12:16:20","date_gmt":"2009-07-08T19:16:20","guid":{"rendered":"http:\/\/seattlebubble.com\/blog\/?p=6262"},"modified":"2014-09-09T07:32:56","modified_gmt":"2014-09-09T14:32:56","slug":"median-price-still-being-distorted-by-geographic-shifts-in-sales","status":"publish","type":"post","link":"https:\/\/seattlebubble.com\/blog\/2009\/07\/08\/median-price-still-being-distorted-by-geographic-shifts-in-sales\/","title":{"rendered":"Median Price Still Being Distorted by Geographic Shifts in Sales"},"content":{"rendered":"

It’s been nearly two years since we originally detailed how changes in the sales mix affects the median price<\/a>, and with King County’s SFH median bumping up over $30,000 in the last three months, now seems like a good time for a refresher course.<\/p>\n

In brief, the median price is simply the middle point—the home sale which saw half the remaining sales come in at a higher price, and half at a lower price. It is a better measure than the mean (average), since it is not disproportionately affected when a single extremely high or extremely low-priced home is sold.<\/p>\n

For example, consider the following over-simplified scenario: Three homes are sold in month A: one for $200,000, one for $350,000, and one for $500,000. The mean and the median are both $350,000. In month B, one home sells for $200,000, one for $350,000, and one for $3,000,000. In month B, the median is still $350,000, but the mean shoots up to $1,183,333, which is obviously not very representative of the market.<\/p>\n

Unfortunately, the median has its own shortcomings, they’re just harder to conceptualize. Consider another scenario: City Q has three very distinct neighborhoods. In Neighborhood X, every home sells for $200,000. In Neighborhood Y, every home sells for $350,000. In Neighborhood Z, every home sells for $500,000. In month A, two homes sell in X, two in Y, and two in Z. The median price is $350,000. In month B, only one home sells in X, one in Y, and four in Z. Now the median price is $500,000. Did every house in City Q shoot up in value over 40% in one month? Of course not.<\/p>\n

While the actual numbers in the Seattle area are obviously more nuanced than that, we are almost certainly seeing the same effect coming into play with some of the recent fluctuations in the median price.<\/p>\n

In order to explore this concept, I have again broken King County down into three regions:<\/p>\n