What should I pay for my next home?

The Wall Street Journal recently reported that the Santa Rosa metropolitan area (you know it as Sonoma County) was the hottest market in the entire country, according to the 'days on market' statistic. The information used that brought about this statement may have lacked analysis of each market's entirety, either equally or not. Metrics used to describe market conditions can be misunderstood by consumers, as there are nuances to each statistic that may allow one to extrapolate a false or misinterpreted fact.

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. In contrast, 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, just be careful to understand the differences that comprise each metric.

Median merely designates a mid-point in which all homes used in the sample are transacting, while average looks at the entire data pool of information reported divided by the total sample size utilized.

A current macro overview of the North Bay region of Sonoma, Marin and Napa counties indicates a median price of $776,000. The same overview reported an average of $974,000 for a single-family home—a 26 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. According to data collected by BAREIS MLS, by the end of June this year, Sonoma County saw its median value escalate to $550,000. With $680,000 as the average price paid, this makes for a 24 percent difference. Consumers trying to evaluate the price of a particular property may come away confused, and the opportunity for multiple offer scenarios could be missed.

Within the borders of Sonoma County, key major markets like the city of Santa Rosa saw its median price climb to $500,000 in June while the average price paid stabilized at $579,000—a 16 percent difference. Petaluma checked in with a median value of $620,000 versus an average value for each home sold during the month of $675,000—an eight percent variance. The town of Sonoma reported a median price of $650,000 while the average property sold was $1,045,000—a chart topping 38 percent difference in analytics.

In Marin County, the median value ended June at $1,170,000, while the average value of a home sold stabilized at $1,414,000—a hearty 21 percent variation between metrics. San Rafael checked in with a median of $1,100,000, while the average sale came in at $1,261,000—showcasing a 15 percent variance between measures of value. Novato witnessed its median rise to $795,000 with the average deal closing for $907,000—a 14 percent difference. Mill Valley posted a median of $1,598,000 while the average deal tipped the scales at $1,841,000—still a 15 percent difference in perspectives to account for.

As a whole, the Napa County market saw its median rally from a year earlier to $609,000 as the average transaction value regressed to $827,000—an astonishing 36 percent delta. Even though the county's markets are still favoring sellers, St. Helena saw its median slip to $1,000,000 while the average property sold for $1,552,000, reflecting a market topping 55 percent variation between valuation models. The city of Napa closed June with a median value of $594,000 while the average price posted for a home sold rose to $790,000—a 33 percent difference.

The savviest people 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…what will yours be?