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You’ve probably heard the notion that a more-expensive house takes longer to sell. Is that true in today’s fast-paced, low inventory era?
2016 Detached-Home Sales
|All SD County|
We know that the $560,000 market has been hot as a pistol, yet on average, it only takes three more weeks to sell a house in La Jolla.
What does the average DOM mean?
It’s the average time before a listing is the best deal in its marketplace.
Because sellers are so consistent about wanting more than the last guy, you could say it’s just a matter of time – you just need more listings to hit the market around you.
If a listing is on the market for months and not selling, something must be really wrong – but price will fix it!
This tends to be a blog for analytical folks, so let’s further dissect the market stats to assist in making better comparisons and decisions about home buying and selling.
We’ve discussed how the supply and demand for one-story homes is quite different from the staired variety. Older folks are hanging onto their single-levels so the supply is lower, and with 76 million baby-boomers heading into retirement with bad knees and arthritis, the demand is growing.
Our MLS imposes a cap on the number of listings for research at 650. So I broke down the numbers below into price categories to help demonstrate the differences in pricing between one-story homes, and not-one-story (two-story, three-story, four-story, split-level, and other):
Pricing of NSDCC Annual Sales Between $1,000,000 – $1,400,000
Pricing of NSDCC Annual Sales Between $1,400,000 – $1,800,000
It’s probably not a big surprise to anyone reading this that one-story homes are more popular. But let’s note two important points:
- One-story homes are carrying the load, statistically – their pricing is appreciating at a steady clip, while the pricing of two-story homes has been flat as a pancake.
- Only use one-story comps to valuate the single-level homes, and likewise, only use two-story comps to put a price on a two-story home. The pricing of one-story homes is so much higher that, if included in a two-story analysis, they will skew the pricing artificially higher.
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A quick search online found several shipping containers available for sale for less than $2,000. Couldn’t a contractor make this his specialty, and produce customized granny flats? House the homeless? Create a commune in the desert?
How do you know if the market conditions are improving? There are the regular indicators to watch to judge whether market momentum is building:
General Market Indicators
Number of Sales is steady or rising.
Pricing is steady or rising.
Average Days on Market is low and dropping.
Months of inventory is tight and dropping (currently 3.0 in NSDCC)
Mortgage rates aren’t jumpy.
But those are mostly feel-good stats and known well after the fact. How can we know which way the market is breaking in real time?
You can expect the well-kept, beautifully staged homes to sell, and most anything with an attractive price should go quickly too. Those with a recent tune-up will be more popular, and having a hot-ticket item will help – great location, one-story, newer, top schools, culdesac, beachy, and walkable.
The best tell-tale signs of market momentum is how the inferior homes do. Make a note when you see a house in this category, and if a few of these go pending around you, then you know the market is starting to cook:
Homes in bad locations.
Houses with long market times (90+ days)
Houses in original condition.
Anti-staging – a house full of old furniture.
Funky floor plans.
A house listed for a price you think is ridiculous.
Wait until the sale is closed to confirm the actual sales price before jumping to any radical conclusions – maybe the sellers had to give one away. Besides, it might only mean that a few weak, anxious buyers dived in too high, too soon, and their agents didn’t stop them.
If you see inferior homes starting to pile up – especially those who lowered their price with no luck – then you know the buyers are winning. When you see a series of inferior homes sell for retail or close, then you can expect the sellers’ confidence to be brimming, and momentum on their side.