Why Median Beats Average: Understanding Home Prices in Phoenix’s Skewed Housing Market

Understanding the difference between averages and medians is crucial when analyzing housing market data. Experts estimate that 70% to 80% of people do not fully grasp the distinction between these two statistical measures, which can lead to misleading conclusions. While many people use "average," "median," and "typical" interchangeably, they have distinct meanings. This difference is particularly significant in real estate, where the average and median sales prices can vary dramatically. The Cromford® Report aims to clarify these concepts for its readers, ensuring they interpret housing data accurately.

The median sales price represents the midpoint of all sales, meaning half of the homes sold for more and half for less. The average sales price, on the other hand, is calculated by dividing the total sales value by the number of homes sold. In a perfectly normal distribution, these values would be similar, but real estate prices are often skewed by luxury properties. For example, in Maricopa and Pinal Counties in 2024, the median sales price was $450,595, while the average was significantly higher at $584,930—a nearly 30% difference. This gap has been growing, highlighting the impact of high-end sales on the average price.

Looking at the data more closely, the disparity between median and average sales prices varies by location. In Maricopa County, where wealthier buyers are concentrated in areas like Paradise Valley, North Scottsdale, and Arcadia, the median price in 2024 was $471,464, while the average soared to $615,025. This 30% difference demonstrates how luxury sales elevate the average without affecting the median. In contrast, Pinal County saw a smaller discrepancy, with a median sales price of $384,000 and an average of $417,486, a difference of less than 9%. The stronger the luxury market, the more the average price is skewed, making the median a better indicator of the typical home’s value.

Over the past three months, the average sales price has increased significantly, yet the median has remained relatively stable. This trend reflects a rise in luxury home sales rather than a widespread increase in home values. The key takeaway is that the average price can be misleading—most homes actually sell for less than the average. In Maricopa County, 71.5% of homes sold below the average price, while in Pinal County, that figure was 62%. This underscores why median sales price is a more reliable measure of the market’s overall health. When evaluating home values, focusing on the median is essential, as averages can distort reality and lead to incorrect assumptions.

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