How Can You Know if You Are in an Up or Down Market?
Building a new home can be an exciting endeavor. And because it is new – the cost structure is rather simple and clear – the price of the lot plus the building cost. No market analysis or comparisons with similar homes. No complicated formulas involving “…how many bathrooms, do you have a fireplace, how old is the water heater, etc.” This makes them a whole different type of market when compared to resales. We point this out at the beginning so you, the reader, understands that buying a new house will entail a different approach and different set of criteria for evaluation purposes versus what is being discussed here. The overall market direction may be the same but the focus of this article is on the resale market.
So how can you know if you are in an up or down market? Should I sell my home now or wait? Should I buy a resale or put it off until for another year? We will discuss how best to know if your local housing market is improving or not – and to go beyond the ‘price’ to determine if you are being priced properly. So, you can have the knowledge to effectively communicate with your real estate broker in making these important decisions.
Model Homes vs Resale
First – we need to remove the model and spec homes available in Compass Pointe from the formulas as they can skew any analysis of comparable prices when it comes to a resale. As previously mentioned, their prices have little to do with any market forces as the builder/developer can set any price they wish. So, we are using sold homes previously lived in by CP owners.
Resales are determined by the current market value and have little to do with the cost of the build. And even less to do with the emotional attachment of the owner (or we would all be selling our homes for millions). The formula takes into consideration a wide range of factors – from sold prices of similar homes in similar local neighborhoods to inclusions to whether the home has been well maintained.
Making Sense of the Numbers
So – which direction is the local resale market going? Let’s make sense of the numbers. We are comparing the average price of homes that were sold in the year from May 2015 through April 2016 to those sold in the year from May 2016 through April 2017 – as appears in the Multiple Listing Service (MLS). What is known as a year-over-year comparison. When making these comparisons it is important to look not just at the whole house price changes but also compare the cost per square foot as houses of different sizes have different price ranges.
The sold prices for resales in 2015-2016 averaged $344,375 while the prices for 2016-2017 averaged $368,427 – a 7% increase year-over-year. That is great news for any market. But – digging a bit deeper, we have even better news. When comparing the sold prices per square foot, we find the increase is actually 11.7% – $143.52 in 2015-2016 vs. $160.32 in 2016-2017. And putting a smile on even the grumpiest of doomsayers – there has been a decrease in the number of days a resale is on the market (according to MLS), going down by 27 days to an average of 119 days. This is a trifecta – three major indexes are moving in the right direction.
Many regions of the country have slowly made their way from a purely buyers’ market (since the Great Recession of 2007-08) to more of an equal basis (buyer/seller) and in some areas, more of a seller’s market. So – regardless of which side of the equation you are on, the major signs in the Compass Pointe resale market are pointing positive.
In this Market is it Better to be Buying or Selling?
So – do I buy? Do I sell? This is actually a good time for both sides. Buyers should understand that buying at the lowest point of a market is almost impossible to predict…so best to buy as prices are going up so you enjoy the increase in value. And certainly before they peak (another point you won’t be able to predict). Sellers are getting bids closer to their asking (though negotiation is still required). And for the same reasons the buyer should wait much longer, sellers can’t predict the forces that can adversely affect a market.
Now it is important to reiterate that there are a whole bunch of other factors that a professional real estate broker will use to price a home for sale or assist you in deciding if the price you are paying to buy a home is reasonable. But knowing the direction of the market can help in deciding when it makes sense to sell or buy. It is also prudent on the buyer/seller to better understand what is entailed in the pricing process so they can better work with a broker in making these very important decisions.
The Importance of Being Well-Informed
We offer this information as we believe the best client to have is one who is well informed and who appreciates being given all the information in order to make the best decision. And yes, we are real estate brokers who would love your business. So, feel free to check out our profile, FosterGillies.com, and our Facebook page “FosterGillies and Associates” for more analysis, articles, and real estate information for the Brunswick and New Hanover counties.
If you are thinking of selling, contact us for a free consultation. If you are ready to start your home search or even just browse homes in Compass Pointe, then you can Search Homes Here. If you know friends, family or acquaintances who would like to visit Compass Pointe, call us and we will arrange a visit. Your friends and family deserve representation and it won’t cost them a cent!