average sale price

Is it turning to a Buyer’s Market?

by John Rice

Short answer: It depends on the house.

Long answer: I read an article this morning asking this same question. It had all the usual data in any article related to the nationwide real estate market. Average days on market, Average sale price compared to previous years, the number of listings compared to previous years……blah blah blah.

None of that really matters. Why? Because no two houses and no two markets are the same. There is no average house. Average means a composite of all data. It does not look at each house individually. Do you know who does look at each house individually? Buyers do.

A buyer looks at every house within their budget and decides which one they want to buy. Let’s say they look at 10 houses. They are only buying one so they pick the best one. Do you know what else happens? Usually every buyer in that same price range also picks the same best one. That means we have multiple buyers competing for the best houses on the market. Meanwhile, the rest of the houses sit there and dilute all those averages so the media can make illogical conclusions to share with the world.

I have been a realtor for 20 years. It was a Seller’s Market when I started. Then a Buyer’s Market. Then an EXTREME Buyer’s Market. Then a stable market. Then it slowly built into the strongest Seller’s Market ever. Now, more than ever, we sort of have two markets. If you want the best house in the best neighborhood, you better be prepared to go over the list price and be flexible on anything important to the seller. If you are not picky, make a low offer on one of those houses that nobody else has wanted. After 20 years of this, I can tell you that when you go to sell whatever house you decide to buy, picking the best one will always have been the wisest decision. The best houses will always be worth the most, be the easiest to sell, and will have the broadest appeal.

Some numbers that don’t matter

by John Rice

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.