I just read about economic indicators and came across the price to income ratio which is also called median home price to median familial disposable income. Why is it more appropriate to use median that the mean or mode of the home price or familial disposable income?
because, uh, mean is prone to outliers…
That’s it.
The median is immune to outliers.
You have a street with 21 houses: 20 worth $350,000 each, and the mansion at the end of the cul-de-sac worth $14 million. Which is a better indicator of the average price:
- The median at $350,000
- The mean at $1,000,000