How can there be such a HUGE difference between the average listing price and the median sales price?

Asked by Glenn Wood, Rock Hill, SC Fri Jan 23, 2009

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Kelli Sheppe, , Charlotte, NC
Fri Jan 23, 2009

The average list price is an average of ALL homes available for sale, including ones where the seller is not realistic about their home value. A better comparison is the average list price of "pending" home sales. These are homes which a buyer and seller were able to come to sales terms for. One could reasonably assume that this average list price is a better indicator of a price that the market feels is close to actual value. An appraiser will look at homes that have recently sold, not taking into account what is on the market, in order to determine the best estimated value of a home. It is important when calculating a median sales price to only use comparable properties that have sold in a recent period of time.

Here's an example:

In one neighborhood there are 2 homes under contract priced at $279,900 and $258,000, representing an average price per square foot of $104. However, there are an additional 7 homes for sale, with an average list price of $282,000 and an average price per square foot of $116 (more than a 10% difference). The median sales price for the neighborhood in the past 3 months is $263,000, or $102 per square foot. As you can see, the homes that are priced closer to market value are selling. The homes that are priced well above market value will eventually either expire, be withdrawn, or be reduced to a price that is attractive to buyers.

I hope this helps.

Michael Fournier
Helen Adams Realty
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Chad Mustin, , Greenville, SC
Fri Jan 23, 2009
If Rock Hill is like many other markets, this discrepancy is because of two reasons. 1) Buyers and sellers have yet to psychologically catch up to the current market conditions and 2) Sellers who have to have a certain amount to get out of their homes aren't willing to take less, and are willing to ride out the market until it rebounds in order to get their money back. Home sellers are notoriously stubborn, and are usually the last people to research or take cues from market trends. The median sales price over the past year is a function of those individuals who absolutely had to sell, and who didn't have the option of waiting until the market stabilizes. Just like any market statistic, you have to take it with the grain of salt of understanding this isn't an exact science.
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