Understanding Home Prices in a New Area
Jen and Eric entered the market for a new home when Jan landed a higher paying job in a new state. The salary boost gave the couple more spending power, but they were unfamiliar with the city and neighborhoods in their new location. Equipped with their new budget, the couple looked for a home in a specific price range. Here are a few places they started and some background information that helped them navigate the process.
Median vs. Average Sale Price
Jen found two sale price metrics for homes in an area she and Eric were considering. The metrics sounded similar, but the values were substantially different. The metrics were median sale price and average sale price. Both can be helpful when determining if a home in a desired area is within your budget, but they are calculated differently.
Average sale price is calculated by adding all of the home sale prices in a specific area and dividing by the number of sales. Median sale price is determined by finding the price at which half of the homes sold for more and half sold for less.
Example: Five homes in the Beaverdale neighborhood sold at these five prices:
$150,000
$215,000
$220,000
$260,000
$300,000
Adding all five sale prices ($1,145,000) and dividing by the number of sales (5), we come to an average sale price of $229,000.
Two homes sold for less than $220,000, and two sold for more than $220,000, making $220,000 the median sale price.
In this example, the average sales price and the median sales price are similar. But in areas where home values vary more widely, that’s not always the case. Here’s another example.
Example: Five homes in the University Heights community sold at these five prices:
$225,000
$290,000
$400,000
$410,000
$1,500,000
Adding all five sales prices ($2,825,000) and dividing by the number of sales, we come to an average sale price of $565,000.
Two homes sold for less than $400,000, and two sold for more than $400,000, making $400,000 the median sale price.
In this example, the average sale price is skewed by the home that sold for $1.5 million. In this case, the median sale price of $400,000 gave Jen a more accurate snapshot of home prices in the community.
Resources for Home Sale Prices
Jen and Eric gauged home prices in a couple of their most desired communities, but the average sale prices were just outside their budget. Eric was open to a longer commute for the right home, so he looked at price ranges in bordering counties using the National Association of Realtors’ chart of County Median Home Prices. The user-friendly page allowed Eric to gauge the price of homes in surrounding counties as well as estimated mortgage payments.
While Eric used the NAR chart, Jen used Zillow to gather more information on home prices in the area. The popular resource shares its home value index, which is the median value of its estimates for a geographic area. It also shows prospective homeowners historic and projected trends for home values and a breakdown of the current market conditions.
For more information on home prices in a specific location or area, contact one of our Sales Consultants at David Weekley Homes. Our Sales Consultants are well connected in their communities and capable of providing the most up-to-date information on home prices, amenities and more.