The headline in today's Victoria Times Colonist read "AVERAGE HOUSE PRICE IN GREATER VICTORIA TUMBLES." Wow, that got my attention! I found it particularly interesting because it was the opposite of what I had been seeing all month. In our office we have been extremely busy and have even been in competitive situations with some of our properties. It sure felt like a healthy, growing market with prices that are stable, or even rising a little bit.
Unfortunately, It seems that a media source has shown us once again that they don't understand how to interpret the information that they are receiving. Maybe it is more important to print a sensational headline than to get the real message across?
When we read the facts deep in the article, we see that the AVERAGE home price did in fact drop significantly but the MEDIAN home price rose slightly. How can this happen? Here is the real story.
The average price is what it sounds like. Add all of the sales together and then divide by the number of sales. However, if a few very expensive homes sell in the month, it pushes the average way up. The median price is another type of average, calculated by sorting all the homes sold, from lowest to highest, and then picking the one in the middle. With a median price, one or two extremely expensive homes have little to no effect on the result. This is much more realistic. If a ten million dollar estate sells in a given month, in reality it has no effect on the value of the average home in Victoria. I've been tracking real estate stats for some time now and have found the median price to be a far more accurate predictor of what the market is doing.
I don't expect the media to change the way that they report the news. We have to face it, they want to sell the news and sensational headlines grab more attention. But, hopefully you now have one more tool to help you read between the lines and determine what the real story is. I encourage you to share this others so that we can work to understand the real story, whether about real estate or other much more imporant events around the world.
