Some numbers that don’t matter

After 15 years in this biz, I’m finally going to drop my opinion on some numbers that don’t matter as much as people think they do…..Let’s go.

Average days on market: This is a snap shot to tell you exactly what it says, the average. If you are a seller, you only care about the days on market of one house, your own. While the average days on market can give you a snapshot of the overall market, there are soooo many variables that it really means nothing. The average days on market is tainted by several things. Thing 1 is that it includes the loser houses that stayed on the market forever. Thing 2 is that it includes new build to suit homes which show either zero days on market or were placed on the market before ground was broken.

Average sale price for all of Lexington or the entire state: You will often see data published that will say what the average sale price is for a specific town, state or even nationwide. Again, it’s just an average and is not at all useful to anybody for any purpose other than people who are writing an article about the real estate market. If more expensive houses are selling, guess what, the average goes up. If more cheaper houses are selling, it goes down. All you care about is your own house, right?

Average appreciation: You’ll read stuff like “The average home value increased by _% this year. That does not mean it is equally applied to every house. Some houses and neighborhoods did better than that, some did worse.

The exact square footage of a house: Sometimes I will encounter a seller who thinks his house is bigger than the PVA or an appraiser says it is. Often that difference is less than 100 square feet. Buyers tend to search within square footage ranges like 1500-2000, 2000-3000, over 3000 square feet, etc. If you have 2050 verses 2150 square feet it is not going to make any difference to a buyer. Which leads me into the next item.

Cost per square foot: This is again an average thing mostly used by people writing articles about the real estate market. The average person reads it and thinks it must be important. If it really mattered, then a very plain 2000 square foot home with ancient HVAC units and a roof that leaks would be worth exactly the same as a 2000 square foot, totally updated home that looks like something out of a magazine and has brand a new roof and HVAC units.

What the PVA says the house is worth: The tax assessor drives by every house every few years in their Toyota Prius, snaps a picture of the outside and places a value on the house for tax purposes. The value is just a number used to determine your tax bill. It is not the market value. They don’t go inside so they have no idea what it is like. Often, it can take years for a house to be reassessed. I bought a house in 2002 for $118,200 that I now rent out. The tax assessment was the purchase price until a neighbor sold in 2004. It then went to $135k. It stayed at $135k until 2018. During that 14 years, the market crashed, stabilized and took off again. The same house is now assessed at $153,300 and appraised earlier this year for $225k. (I hope nobody from the PVA follows my blog….shhhhhhh!)

The Zestimate: Is almost never correct. It’s a computer that takes in a lot of data without any wisdom about what makes a house worth more or less than other ones in the neighborhood. It’s sort of like the ultimate use of averaging data. Like the PVA, it can’t take into consideration things buyers factor into picking a house like colors, cleanliness, floor plan, shape of lot, slope of driveway, amount of natural light, number of trees, or a good or bad view. About the only time I have seen it be fairly accurate is in a newer subdivision where most of the houses are similar. The less variation in condition or updatedness, the easier it is to figure out a value because the value range is less broad. The more variation, the more you need an experienced realtor.

There you go. It feels so good to get this off my chest. I hope it helps you better understand the real estate market and how it impacts what is likely your biggest investment.

How do houses go up in value?

Ever wonder HOW prices rise for houses?

Before I got into real estate, I didn’t really think about it. You’d read stuff like the average price went up something like 4.6% last year…I assumed it was like a rising tide and affected every house the same way at the same time.

But it doesn’t work like that. It works more like traffic taking off after a stop light. The first car goes, then the second car see the first car moving and goes, then the third car sees the second car moving and goes, and so on. As much as I wished they would all move at the exact same time, they don’t. And that is exactly how prices go up in real estate.

There are lots of factors impacting value: Supply/demand, location, price range, condition, etc. No surprise here, but when prices are going up, the neighborhoods that are the most desirable and have the least supply go up first. Once there is enough of a price gap between those neighborhoods and the next best neighborhood, the prices of the second best neighborhood start to rise as buyers see a bargain and move in that direction. Then when the prices are up on the second best neighborhood, that does two things: It makes the prices go up on the first choice neighborhood since it is better, and it also drives bargain shoppers to the third best neighborhood. This process ends up going through ALL the neighborhoods in town as long as the market remains hot.

I sold two houses in one particular neighborhood several years ago to some friends wanting to rent them out. I was telling my friends that I thought the prices in the neighborhood were about to go up since there was a big gap between what an identical house was selling for in other neighborhoods. Since I tend to Geek out on this type of stuff, I don’t think they were as into it as I was…..but now their houses are each worth $35-45k more in just a few short years.

So, next time you are stuck in traffic, forgive me if it makes you think of real estate.

LEXpert Perspective: Today’s Market

It’s been an interesting spring market. I won’t get into why it has since the reason is all over the news and on all of our minds.

The market goes on though.

Both buyer and seller activity has greatly decreased. However, there are still more buyers than sellers so the supply-demand thing means any decent house that is priced in the realm of reality is going to sell very quickly. There has been some speculation that there will be more listings on later this year as sellers put their houses on the market after waiting this out. Yes, that will happen, but there will be just as many buyers out too so it won’t get any easier to get a house. Bottom line is if you are ready to sell, then do it. If you are ready to buy, get out there. Waiting is not going to change much.

One good thing I am seeing lately is more and more houses under $200k. Last year there just weren’t too many houses hitting the market under that price. I scroll through the new listings every morning. They are sorted from lowest price to highest price. Seemed like last year after the first few houses it quickly got over $200k. This year it seems I am seeing many more under that affordable threshold. I think this probably has to do with the low interest rates. A lot of those buyers with $150-200k houses are stepping up to the $250-350k range. If you’ve been reading my blog for long, you have heard me say that first time buyers are what greases the gears on the real estate market. They are usually the only people who don’t need to sell a house before buying one. There have been plenty of them out there the past couple of years, but there haven’t been enough houses for them. That is why a house that was $140k a few years back is now a $180k house. If you are going to be looking in the sub $200k range, NOW is the time to get out there. Don’t worry about the sky falling. Just do it. I’ve had several people who were always worried about buying at what is perceived as the top of the market. All of the houses they thought were too much back then are all worth much more now.