Why do we use Medians

[Bigtone]

But the median can be skewed by the release of new developments where they statistically form more than the normalised market, whether it be another 50 units in an area where 200 units are sold annually, there can be a substantial skewing of the median. Hence the need to have several medians not just a suburb, house or unit median - there are subgroups which will reveal a more poignant result.

yes this happened in Beaumaris last year, big release of expensive apartments no beach road or close to, increased the median dramatically and others on here were saying that Beaumaris units had received an increase in value when the existing stock may have moved 1-2% tops

also when you look a capital city median that the media love "Melbourne prices" basically 90% of all new stock released in the new areas are below the median figure, pulling it down. What you would have purchased for the median price in melb 30 years ago would have had far more growth than would the median price growth would reflect.

I hate median prices especially short term ones that get the headlines

 

[Scott No Mates]

That would be the "mode" or most common number of legs?

Depends if you included a few chairs.

 

[MTR]

It is not all that we have to go on but what the lazy can access.

Stats are just that, someone else's take on the matter at hand.

Have you (or anyone) really taken an interest in what is churned out by domain/re? Oh, it has jumped x%

What utter BS - these figures can be horrifically distorted by several factors eg: new development sales all settling putting 50+ sales of new units into the recorded sales.

Take the figures apart, order a full sales report for 2 years then dissect them. Categorise the sales: units 1/2/3 bed, houses 2/3/4 etc. Work out your median/mean for each type of unit or house. Hmmmm amazing how your stats differ from the published average/median prices. Which would you rely upon? Now do some sophisticated modelling ie bell curve distribution, 5% confidence levels etc then you will have something that you can chew over and take to your next OFI before putting in your offer. (sure there are a few more things to consider but we are talking statistical modelling not val theory).

[Pinkboy - those judges are onto something]

Absolutely agree with you, I have witnessed this many times in my own area, in particular if a number of mixed use commercial/resi is sold have seen median jump up as much as $100,000+.

Stats, well I take them with a grain of salt, just kind of a guide I guess, but I don't take this information too seriously.

 

[Indifference]

I must admit, this thread has been a little bemusing to me...

What is trying to be articulated by using a median, mean or mode, is the "expected value".

Now, depending on what is being analysed, a different "expected value" method will be appropriate. For example, for the expected value of raw data it is generally better to use median (reduces tail affects as others have said). The expected value of a distribution (yes, there are actually many more than the standard normal a.k.a. Gaussian distribution) it is usually best to find the mean of the distribution. In other situations the mode is best ie. when gambling we use this method to determine the best odds.

They each have a purpose and each have their own limitations. The real question is not one or the other.... as each tool has a purpose. For the purpose of RE figures (raw data) it is generally better to use the median. BTW, when the data tends towards a normal distribution, the mean & median converge to the 50th percentile ie. they are the same.

I haven't even mentioned geometric means or better yet, maximum likelihood estimations..... another day perhaps.