Average Price: The Worst Statustic in Real Estate

20 April 2016

The worst statistic most often quoted in Real Estate is the average sale price.

Did you know that the average sale price of an area can change when there are no actual changes in prices of any real estate? This is because the mix of sales always changes over time.

For Example, one month you can have one $1,000,000 property sale and nine $100,000 sales, the average price works out to be $190,000. Next month, 10 more sales of similar $100,000 properties will give you an average price of $100,000. The newspapers will report a 47% drop in average prices.

If you look at the Toronto Real Estate Board, the average sale price in May is always higher than the average sale price in October, every year! Do you think sale prices fall every year throughout the year? No, it’s just the mix of sales that changes. There are fewer sales in October then May and more expensive homes sell in the spring.

Finally we talk about the Average Sale Price of the Average Canadian home all the time. The home is located East of Winnipeg, has 3.2 bedrooms and 1.6 bathrooms, and I’m still looking for it.