Batting for average may be a home run

This article is reprinted from Wine Country Real Estate, a special advertising section of The Press Democrat.

The boys of summer are back in full swing, and so is the tracking of the most tedious statistics about everything. Major League Baseball is likely the one sport that you will encounter with the most statistical reflections of obscurity. The teams and the league dive into the minutia of details to track performance, making calculated decisions regarding who will take the field on any given day. As a majority of these metrics typically rely upon an 'average,' you may wonder why in real estate there are countless references to 'median' home prices.

In real estate, one of the most common components of a detailed evaluation is typically referencing what the average price of a home is in a specific niche of the market, whereby the calculation is based upon recent sales of similar homes in a similar area. Taking into account the difference between average and median valuations is very relevant. Either can be utilized in tracking or arriving at broad market valuations. However, the average may be more reliable as it may paint a clearer picture of the overall composition of a sub-market. This allows both buyers and sellers to have a more realistic interpretation of a specific market, as opposed to the median which lacks the ability to track velocity in the markets and merely designates a mid-point between which all homes used in the sample are transacting at.

A current macro overview of the North Bay region of Sonoma, Marin and Napa counties indicates a median price of $765,000. The same overview reported an average of $1,011,000 for a single-family home – a 32 percent difference. This critical distance between the valuations means you must truly lean on your professional advisor to better understand what the real market value is for a particular home.

Sonoma County has seen growth in both these metrics. In May of 2014, as the markets were in full spring swing, the median value for a single-family home rested at $485,000, while the average indicated $607,000. According to data collected by BAREIS MLS, Sonoma County saw this number escalate to a reported median of $546,000 by the end of May. This is in contrast to a reported $688,000 as the average price paid – a 26 percent difference. These differing values caused much confusion among consumers trying to evaluate the price of a particular property, thus accounting for not winning out in multiple offer scenarios.

Within the borders of Sonoma County, the city of Sonoma saw its median price climb to $731,000 in May while the average price paid shot up to $1,037,000 – a 47 percent difference from one metric to the other. Southeast Santa Rosa checked in with a median value of $512,000 versus an average value for each home sold during the month of $741,000 – a 45 percent discrepancy. Similarly, the Sonoma Coast compiled a median of $700,000 while the average deal tipped the scales at $923,000 – a variation of 32 percent. Elsewhere in the county, Windsor recorded a median of $546,000 while the average transaction was $692,000. Healdsburg's median rebounded to $918,000 while the average sale perked up to $1,110,000.

In Marin County, the median value ended May at $1,171,000 while the average value of a home sold stabilized at $1,512,000 - a hearty 29 percent variation between metrics. Kentfield checked in with the most dramatic difference as the median hit $2,500,000 while the average sale came in at $2,968,000 – showcasing a 19 percent variance between measures of value. Corte Madera witnessed its median rise to $1,370,000 with the average deal closing for $1,608,000 – a 17 percent difference. Tiburon posted a median of $2,888,000 while the average deal closed at $3,172,000 – still a 10 percent difference in perspectives to account for.

As a whole, the Napa County market saw its median rally from a year earlier to $579,000 as the average transaction value climbed to $832,000 – an astonishing 44 percent delta. With the county's markets favoring sellers, St. Helena saw its median rise to $1,344,000 while the average property sold for $2,219,000 – reflecting a market topping 65 percent variation between valuation models. The city of Napa closed May with a median value of $595,000 while the average price posted for a home sold rose to $653,000 – both actually lower than the prior year as more less expensive properties changed hands during the month.

The median clearly indicates less volatile differences than the average, but may truly miss the mark on what a realistic price is for any given property, thereby leaving a buyer on the bench while the game goes on. The savviest players in the market turn to different valuation methodologies and professional guidance in order to assess conditions that will comprise the basis of a winning proposal. Batter up!