I’m a little bit behind on 4th Quarter Sales data. I just started this morning crunching the numbers so I could let readers know where home values ended for 2016. However, when looking at the data I saw a fascinating trend in the Medfield-SAS-Umstead area and had to write a separate blog post about it.
All over the Triangle, housing prices are increasing, across pretty much all price points. Since I live in Medfield, I like to know what our neighborhood is doing specifically, but since people don’t tend to move out of Medfield very often, there aren’t very many sales. To get a bigger picture, I run the numbers on 2 MLS subzones surrounding Medfield. (These zones are designed by the Multiple Listing Service to give agents an easier way to manage showings, listings, data, etc.) You can see the zones for our area in the map below. I use sections D and E for my purposes.
As you can see from the following data, in the Medfield-SAS-Umstead area, prices decreased in the 4th quarter by 4.35% and the Days on the Market increased by 310%. I was a little surprised by the 310% number so I removed new construction and that brought the number down to a 20% increase, which was more reasonable, but still an increase, which is surprising given the overall market.
To give you an idea of exactly how different this is from surrounding areas, look at the chart below, which references the rest of the areas in the above map. (I found similar data for the areas directly to our north.)
The areas surrounding us saw home price increases of 14% and their days to sell a home decreased by 15%. This discrepancy was shocking to me. We have great schools, amenities and one of the best locations in the Triangle, with low commute times to just about anywhere. Why would our area not follow the general trend we are seeing everywhere else?
To figure it out I had to dig a little bit deeper.
My first thought was that properties were not marketed as well in our area, maybe due to more For Sale by Owner listings or discount brokerages. But no, they were very low, and at a similar rate in both groups.
Do we have more older homes? Nope, median home age was the same for both groups.
With those things out of the way, my next suspicion was overpricing. I talk more about this in The Home Seller’s Guidebook, but the short of it is, roughly 25% of properties that list a home for more than it’s value, end up both reducing the price (to actual value) and then selling at a discount of the reduced price. There’s a lot of buyer psychology that plays into it, but that’s the gist of it. In essence, overpricing reduces a home’s sale price below market value.
So I got out my note pad and started making tally marks for every property that was listed initially higher and then dropped their price. (This is why it takes me so long to crunch data. Sometimes there isn’t an easy way to find the information.) Bingo! Nearly half of the properties in Medfield-SAS-Umstead started out at a price that was too high and then had to reduce their price. Almost every other property that was listed, listed too high. The surrounding areas, by comparison, only had 22% of properties that were initially overpriced.
This may not be the only reason that our values aren’t mirroring surrounding areas, but it is certainly a piece of the puzzle. Almost everyone I know that lives in this area loves it more than anything. We know how amazing the location is and what a nice community we have. We certainly don’t have a lot of turnover, which shows how many of us feel this way. But when we do list our homes for sale, let’s be careful that we are using accurate data to determine value and not emotional connections which can’t be quantified.
One more quick observation about the home sales in surrounding areas… There were 7% more homes in the surrounding areas that sold above list price than in Medfield-SAS-Umstead. There were also a larger percentage of homes who increased their price, after showings proved that the price was set too low. In our market, it isn’t really possible to price a home too low because there are so many buyers. Buyer competition combined with appropriate pricing and marketing is what determines value. If your price is too low, buyers will still bid over the list price. If your price is too high, they will move on to something more reasonable. Pricing too high is the bigger risk.
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