The only way that the true price of a property in Las Vegas is calculated is to see how much similar properties in similar locations have sold recently and recently is determined by the market conditions. If the real estate market is stable, one can go back about six month, if the market is not stable, a shorter period of time. Other considerations include how well the property is maintained, location and market direction.
Now real estate news articles only discuss the median price and I keep writing that median price does not provide any useful information about the market. Below is why.
Median is a mathematical term that indicates that one half of a set of numbers is higher and one half lower. For example if 101 homes sell in a given area and we order the price in ascending order, then the price of the 50th home would be the median price since 50 homes are priced higher and 50 homes priced lower.
Average price is different and is calculated by totaling the sales prices of all houses sold in an area and dividing that number by the number of homes. To explain this a bit better, let’s say that we have sold 11 homes that are priced at:
$10,000, $30,000, $30,000, $40,000, $45,000, $70,000, $75,000, $76,000, $90,000, $100,000, $100,000
The median price for these homes would be $70,000 since five homes have sold for more and five homes have sold for less.
Now imagine that the prices above have increased by $5,000 for each home. However instead of selling a $70,000 property we sold one for $55,000. The new sale prices are:
$15,000, 35,000, 35,000, 45,000, 45,000, 55,000, 80,000, 81,000, 85,000, 95,000,105,000, $105,000
Even though we have increased prices by $5,000, the median price has decreased by $15,000. Now this is an extreme example due to the small sampling of numbers but it proves how useless median numbers are when discussing real estate market or direction.