The Honolulu Board of Realtors routinely uses a statistic called the median sales price. No doubt you’ve heard real estate agents use that term as well. The median is defined as the midpoint between the most expensive home and the least expensive home sold during a specific time period. Many folks think the median is the same as the average sales price, but they are mistaken. Take a look at the Oahu Residential Resale Trends to see how median and average sales prices differ.
Why is this important to you? Well, the median price can be misleading, especially in a market or neighborhood with few sales and where prices have a wide range. The North Shore is a good example of such a market.
Let’s look at two simple examples (fictitious numbers):
Both of these examples could take place on the North Shore in a given month. This clearly illustrates that the mix of homes sold may dramatically affect the median sale price. Knowing this, we must use great care when evaluating sales trends because as you see above, just one different home sale can change the median by over a million dollars.
A neighborhood’s sales mix can change over time and thus artificially inflate or deflate the historical median sales price. Kakaako is the most recent example. During the middle of the decade, over 3000 higher-end condos were constructed and sold. This changed the Kakaako price mix. As some of those new condos were resold, median sales prices rose. Without knowing that the neighborhood mix had changed, one may have concluded real estate prices were climbing. In today’s market, that would be the wrong conclusion.
