Median House values: useful or nonsense?

Hi Benny,

Thanks for making the post.

Can I sit on the fence a little bit and suggest median house price information is ‘interesting noise’?

The challenge is understanding what median house price represents as a statistical measure (i.e. median vs. mean), and how the data is collected and analysed. As they saying goes: garbage in, garbage out, so the data being reported is only as good as the data being captured and analysed.

The difference in approach accounts for how different data series can provide different values off the same raw data. You really need to be a trained statistician to understand the integrity of each approach.

What I do is pick my preferred data series, and look at the trend over time, rather than a value in time. The trend provides guidance on how the middle of the market was behaving, as some guidance to how the market is behaving, and how it may behave.

A relative number in the same data set is useful to make value comparisons: city v. city, city v. region, region v. region, etc.

However the number, like any number, is just a ‘reading’ on the instrument panel of a property investor’s cockpit. Interpreting what the number means relative to the other dials and levers is where investing skill comes in.

Another analogy is that median house prices is the view in the rear mirror. That’s helpful. But even more important is looking out the front windscreen and taking notice of what is happening in the market now, and what’s coming over the horizon.

All the best,

– Steve