The Median Home Price Essay
The Median Home Price
The median home price in your area has increased in the last 10 years, how does this differ from the mean home price your area?
The mean, which is commonly known as the average, is the sum of numerical coefficients divided by the number of quantity redundancy. For instance, the mean of numbers 2, 4, 4, 5, 10 is 5, while its median is 4. The median, on the other hand, is the middle coefficient in a given set of numbers.
Given the basic difference of mean and median, it is therefore possible for the median home price to have a greater or lesser value, which is ultimately dependent on the price range in the area. For instance, if my community is very diverse in terms of economic capacities of the residents, the cheapest home being $50,000 and the most expensive being $1,550,000, then the median home price would be $800,000. If in this same neighborhood, the number of high-income house is considerably more than lower income house, then the mean or average price can be higher than $800,000; if there is a larger number of low-income houses, then the mean or average price can be lower than $800,000.
Mean and median are essentially different measures with different purposes. The mean is the more accurate measure when the spread of pricing is fairly small in terms of range. If the neighborhood is homogenous in terms of economic profile, then the mean can be used. If there are deviants in price, like very cheap or very expensive houses, which can drastically change the average, then the median is more appropriate to use.
In conclusion, the median home price in my area for the past ten years can remain unchanged, while the mean is increasing or decreasing; this can go both ways or simultaneously. What needs to be considered, in determining whether to use the mean or median, is the numerical price spread of the houses.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 16 February 2017
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