There are two words that many people use interchangeably that actually do not represent the same thing at all: mean and median. In today's blog we'll clarify the difference for you.
In the mortgage industry you will sometimes see “median” home value and “mean” home value used within the same article. The median is a number that divides the upper half of a group of numbers from the lower half. Let’s say we have five homes with the following values:
$ 800,000
$ 600,000
$ 300,000
$ 200,000
$ 100,000
The median value is $ 300,000.
The mean value is actually the average, the sum of the values divided by the number of values. The five values add up to $ 2,000,000, which divided by five equals $400,000.
Now then… what if there are six values involved and there is no even median? In that case you take the mean of the two middle values to determine the median:
$ 900,000
$ 700,000
$ 600,000
$ 500,000
$ 400,000
$ 300,000
The median is $550,000 - the average of $600,000 and $500,000. The mean is $566,666 and some change.
And that's the difference between the terms!