Home prices have been massive lately, but there is an asterisk. It’s easy to look at glowing stats and say, “Dude, prices are up 16%, so my house is worth 16% more.” But lofty county or regional price stats don’t always show up the same in a neighborhood. Let’s talk about this.
TWO REASONS WHY PRICES ARE SO HIGH ON PAPER:
1) The top & bottom: There have been more sales at the top of the market and fewer sales at the bottom. In fact, when comparing the past four months this year with last year, we’ve seen 20% fewer sales under $400,000 and 75% more sales above $750,000. Here is a brand new visual to show the change in various price ranges. If you’re not in Sacramento, is this happening in your area too?
The effect: Having a big change in volume at the lowest prices and a hefty change at the top has simply boosted price metrics. Thus on paper price stats are really high compared to last year, but when pulling comps in a neighborhood we don’t always see anywhere close to this sort of explosive growth.
Here’s another way to look at the same data:
2) Larger homes: I’ve mentioned this before and I’m not trying to beat the dead horse, but during the pandemic buyers have been purchasing noticeably larger homes over the past four months. Do you see the spike? In short, having larger homes has boosted price stats, so when talking about growth it’s good to remember that part of the reason for higher prices is due to larger homes selling more often.
The takeaway: There is no mistaking the market has increased in value quite a bit this year. I’m not saying it hasn’t. I’m just saying if we’re not careful it’s easy to get infatuated with lofty regional price stats which can sometimes blur our vision for a neighborhood market. My advice? Know why the numbers are the way they are and focus on comps instead of county or zip code stats. Moreover, don’t expect the market to be the same temperature with every location, price range, or property type.
I hope that was interesting or helpful.
Questions: Have you seen some neighborhoods where prices have risen greatly and others where growth is more subdued? Did I miss anything? Any stories to share?
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An army of support: While I was in the hospital a GoFundMe was started by my friends Erin Stumpf and Joe Lynch. I’m honestly a guy who hates accepting help. I would never in a million years have asked for something like this because I always want to be the giver. So it was humbling to see my face online and to have my colon become internet famous (haha). I received a text message basically saying, “We’re going to do this and your peeps are going to take care of you.” And that’s what happened. Everyone, I cannot put into words how grateful I am for you carrying my family during this time. As the hospital bills start rolling in and I haven’t had income for over two months, your generosity has been a tremendous blessing. It’s frankly taken off some pressure and given me space to adequately heal. I still have lots of individual thank yous to say and I will get to those over time, so please be patient. But for now I want to publicly thank everyone for your support. I have no words to express how deeply grateful I am.
