The median home price is the threshold which divides the real estate market into two equal halves, in reference to pricing. One half of all homes in the market are priced above the median home price, while the other half are priced below it. For example, the median home price in the United States was $213,900 in the fourth quarter of 2005, meaning that half of all homes in the US were priced above $213,900, and half were priced below $213,900. In California, the median home price was $548,000.

The median home price is one of the most common measurements used to compare real estate prices in different markets, areas, and periods. It is said to be less biased than the average since it is not as heavily influenced by the top 2% of homes. For example, the average home price in the US was $264,000 in October 2005, compared with a median home price of $213,900 for the same time period.

Mean (average) home price

The mean home price, or average home price is the sum of all home prices in a certain area, divided by the number of properties in the same area. For example, inside the Willowood Townhouse complex in Salinas, California, there were five townhouses for sale in March of 2006. The properties were priced as follows: one for $450,000, one for $459,000, two for $465,000, and one for $499,000. The sum of all of these properties is $2,338,000. This number is then divided by five, which equals $467,600. Thus, the mean home price for a townhouse inside Willowood was $467,600 in March 2006.

Sales price per square foot

Sometimes real estate prices are measured by the price of each square foot. This allows for a better comparison between differently priced homes as well as homes of different sizes. In this pricing measurement method, the median or mean price of a home is divided by its square footage. For example, a 1,243 sq. ft. home was for sale for $465,000. To find the per square foot price, the price of $465,000 is divided by the square footage of 1,243. The result, $374.09, is the price per square foot for this particular home.

To effectively compare neighborhoods, the mean or median home price of a neighborhood is divided by the mean or median square footage. To refer to our example of Willowood Townhomes in Salinas, CA, the sold units in Willowood range from 1,243 sq. ft. to 1,621 sq. ft. The first four units are each 1,243 sq. ft.; the fifth unit is a little larger, measuring 1,621 sq. ft. The square footage of all units combined is 6,593 sq. ft. This number is divided by five, the number of homes for sale, and the result, 1,318, is the mean square footage. The mean price for the sold townhouses in Willowood of $467,600 is then divided by the mean square footage of 1,318; the result is a mean price of $354.78 per square foot.

Rent per square foot

Rent is also calculated by square foot. The rent per square foot is often used as an effective tool in comparing tenements and different markets, when units are of different sizes. For example, in March 2006, a 1,600-square-foot single-family home in Aptos, California charged a monthly rent of $1,800. In order to find the rent per square foot, the rent of $1,800 is divided by the square footage of 1,600, which gives a rent per square foot of $1.12.

Another 1,140-square-foot home in Aptos, CA had a rent of $1,595 per month. Again, the rent of $1,595 is divided by the square footage of 1,140, which equals $1.40 per square foot. So, even though this home has a lower overall rent, its rent per sqaure foot is actually higher than that of the first home.