A seller thinks his property is worth about one million dollars more than it actually is because he hijacked a price per sq ft from a different house down the street and applied it to his own. Doh!! This happens all the time unfortunately, and it’s an example of how simple real estate math can create big problems. Let’s talk about this, and I also have fresh stats for anyone interested.
THERE ISN’T JUST ONE PRICE PER SQ FT NUMBER TO USE:
It’s easy to overprice if we’re just looking at price per sq ft instead of actual comps (similar homes). Check out the range of price per sq ft among sales in the wider Sacramento region. There is a massive spectrum depending on size, location, upgrades, etc… In other words, there isn’t just one number that fits all properties in the neighborhood.
DOWNLOAD THIS TEMPLATE:
If anyone wants to create a table like this for your area, I’ve included a template. You just need to find the stats. Download the template here and use however you want. I think it could be cool to do neighborhoods instead of cities too. If you have a Rapattoni MLS system, you can actually use the statistics tab to quickly find the high and low. Do a map or standard search (selecting only closed sales), and then hit the statistics tab. Scroll down to find the data. I double-checked data for multiple areas to be sure it is accurate, and it’s spitting out the right numbers.
NOT STUCK ON THE LOWEST NUMBER
People often get stuck on a lofty price per sq ft because the math gives an incredible answer that people want to hear. I rarely meet anyone stuck on the lowest number in the range unless assets are going to be split and one party is trying to short the other. In conclusion, check your bias in situations like this. Are you using a price per sq ft figure because you’re looking at comps, or are you fixated on a number because it gives you an amazing result?
STARBUCKS CUPS ANALOGY
My favorite way to describe price per sq ft is with Starbucks cups. I’ve used Dad bods and Lamborghinis too. My advice? Use what works for you.
REAL ESTATE CANCELLATION CULTURE
I’ve been getting more questions about cancellations lately, so I ran some stats. I can keep adding to these visuals if it would be helpful (let me know). In truth, I think I need to compare the number of cancellations with the number of active listings somehow since we still have such an anemic supply today. Basically, cancellations have risen, but we’re not at alarming levels. Keep in mind we do have more listings this year, so it seems like we would probably have more cancellations too unless there were many more buyers.
FRESH STATS in 9 COUNTIES:
I’m pulling stats for nine counties these days, and I’ll keep doing so as long as it’s a felt need. You can view all these visuals under the STATS tab on the navigation bar too.
HOW I’M DESCRIBING THE MARKET RIGHT NOW:
The good news is we have more closed sales, more pendings, and more new listings this year, but overall, it’s been pretty mediocre growth with closed sales. Much of the volume growth we’ve seen this year is thanks to Placer and El Dorado County. The market still has historically low supply as we’re missing about 5,000 new listings compared to a normal year, but this year we’ve had about 2,000 extra new listings compared to last year, so sellers aren’t as stuck as one year ago. I think we’re feeling a temperature difference due to more new listings since the gap between sales and listings is wider this year. Yet, the market has been slightly more competitive than normal still when looking at many metrics. Basically, we are now so much closer to normal than the craziness of 2021. Keep in mind buyers are hungry for the good stuff, so there can be intense competition when a property hits the market that checks all the boxes (too many buyers are looking for that one property). With that said, it’s either multiple offers or crickets these days, so sellers need to be ready to find the market through price reductions if buyers aren’t biting. Anyway, more on my socials this week.
IMPORTANT NOTES:
1) Down from 2022: Keep in mind prices are still down from their peak in May 2022, but they are up from one year ago since prices saw a bigger dip for the second half of 2022.
2) Don’t be rigid: Median price and average price change doesn’t translate rigidly. In other words, it would be a mistake to think your value is up X% since the median is up that much. Maybe. Maybe not. Look to the comps.
3) Smaller counties are erratic: I’m not crazy about some of the price stats in the smaller counties since there just aren’t enough sales to be meaningful. Please note smaller counties are grouped in 60-day chunks since stats are erratic with only 30 days. I might even try 90 days instead.
YEAR OVER YEAR
MONTH TO MONTH
I hope this was interesting. Thanks for being here.
Questions: What resonated with you the most above? What price per sq ft stories do you have to share? What did I miss?
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Not directly related to this post, but it might be cool to see some stats comparing our region to the mayhem going on in Florida.
Great work as always!
Thank you Joda. Agreed. Seems like the vibe in Florida and Texas are way different. I wish I had more direct access to data in Florida. I’ll keep my eyes open. Lance Lambert is definitely posting some stuff.
Excellent and timely information, plan on using some of the stats with a new seller!
Awesome. Thank you so much Michael. That’s cool to hear.
Thanks as always for the post. Do you follow anyone who puts out good content on the Los Angeles market?
Thank you so much Brad. I don’t know many, but maybe check out Steven Thomas. He pushes out lot of stuff for all of SoCal, and he’s a smart non-sensational housing voice. Some of his stuff is likely behind a paywall, but he has lots of public stuff too. Let me know if you find anyone else.
RSS feed showing this timely but no email notice.
Great info. My favorite post of yours by far is the Starbucks post. Nice to see it coming back….
Thanks Joe. Man, it’s so frustrating. I got an email this morning from MailChimp, so I know it’s working. Some weird stuff lately. I’m frustrated that I keep having to moderate all of these comments. Something is broken in the settings right now.
I agree, price per Sq ft is a terrible way to value most homes unless the home you’re obtaining the price per square foot from is almost exactly the same as the subject in size, lot size, amenities, quality, and condition. In that case, why not just compare directly? I have some great real world examples of this in a class I teach. We use price per Sq ft to value a home using price per Sq ft extracted from sales from the same builder in the same subdivision. Even with the homes being very similar, the price per Sq ft is way off the mark when we do direct sales comparison.
Thanks Gary. I think it’s cool to see the range here. Hopefully people get a sense of how much it can vary. I hope to hear you teach some of these things.
Thanks for this information, Ryan. I was surprised to see Placer County median price down (not much, but down nonetheless) and EDH up 6% from last year. I’m wondering if there is a vast difference between South Placer County and the Foothills/Tahoe. Would be interesting to break that down since Placer County is so large.
As always, I appreciate your insight and stats!
Thanks Joanie. You know, Placer can bounce around a bit since there are not that many sales each month. Sometimes I am hesitant to share price stats from some of the smaller counties. I mean, Placer is often pretty decent, but El Dorado is really erratic from month to month when it comes to price trends. I haven’t split the trend between South Placer and everything else, but I may be open to that at some point. All that said, one consideration here for Placer is the average and median size of home was about 3% smaller this year. While that is not massive, the difference can start to add up. So, one of the things we want to watch is what is selling.
Ryan regarding the amount of cancellations. I have noticed that there are agents that are canceling the listing & then same day coming back on the market, with no changes.
This bothers me, like they are trying to trick us, so I am now really paying attention
& checking cancellations. I have asked agents why they are doing this? Fresh internet action, is the answer I have gotten. Probably true but throws stats off I imagine. Thanks Ryan for all your wisdom & willingness to share.
Thanks for sharing. I appreciate it. Sorry for the delay in response. I’ve been getting a ton of spam comments, and it’s been so challenging to sift through legit ones. For instance, I just deleted 490 comments from the weekend alone. doh!!! There are some games sometimes like this. I’d love to hear from any onlookers who do this as a strategy. Does it work? What are the pluses and minuses?