What was the price of a Single Family Home in Marblehead in July?

It’s August, known in some quarters as the silly season, when hard news is short. So here’s my silly season contribution.

Quiz: the price of a Single Family Home in Marblehead in July 2013 was:
(a) $590,000
(b) $635,250
(c) $697,837
(d) $712,815
(e) all of the above

The answer is

The prices quoted represent:
(a) the median price including 2 distressed sales
(b) the median price excluding 2 distressed sales
(c) the average price including distressed sales
(d) the average price excluding distressed sales

Rather than supporting the argument of those who say that numbers are meaningless, I am giving these numbers to emphasize that when you see numbers in a report it is important to understand what number is actually being reported.

To clarify: as multiple studies have shown that distressed sales – foreclosures and short sales – occur at a discount to normal sales, I always exclude distressed sales from my median price calculations. Thus I compare like with like.

And the reason for using median prices – the one where there are an equal number of sales at both higher and lower prices – rather than average prices can be seen here:

Source: Oliver Reports

Source: Oliver Reports

Clearly the median price gives a better picture of the market than the average price.

When looking at a narrow price segment – say sales between $500,000 and $550,000 – there will be little difference between median and average prices, but when looking at an overall market or a wider price range median gives a more accurate picture.