I’ve been reviewing single family home sales stats for Winchester, MA. Statistics was my third language in Grad School, after English and French. The first thing to know is that, as samples, the numbers of cases in local home sales are way too low to be of the slightest statistical significance. However, if we realize it’s not a sample but the universe of single family homes sold in Winchester, it makes more sense. True it doesn’t include sales that don’t make it to the Multiple Listing System (MLS), but it certainly includes the overwhelming majority of home sales in Winchester. In any case, these are the parameters I’m working in.
Here’s what’s interesting: Sales of single family homes sold in Winchester in 2017 rose through the year on a trend slope of 15.5% from start to finish. In 2018 the slope was much flatter at about 3%, around a third of the previous year. A little startling, maybe, but actually reflective of the common wisdom I’ve been hearing about prices slowing down.
There’s another way to look at it though. Now, my old boss used to get after me for taking the cost per square foot into account. Heaven knows it can be a problem. When I value a home I have to take into account not only the size of the home itself, but the size of the lot, the overall location, and so forth. Still, $/sq.ft. reduces everything to a kind of common denominator. And there’s just no getting around the fact that when I see a home not selling, the $/sq.ft. is usually significantly higher than the ones that are selling. Even considering that the bigger the house, the lower the $/sq.ft. in general. So
Now, when I look at the $/sq.ft., I see that the 2018 trend line’s slope is about 1.9% over 2017’s 1.5%. In other words, 2018 — in $/sq.ft. terms is nearly one third again over 2017. That’s different from the straight sales price. Consider that the distribution of lower valued homes to higher valued homes may change from year to year, maybe affecting the average sale price.
So what to make of all this? Well, when I’m valuing a home, I look at as much data as I can, then I meditate on it all. I’m a certified Pricing Strategy Advisor (PSA), and that training is very helpful especially in terms of data gathering. Then after I gather data and consider what it means, I double check it yet again. Then I come up with as narrow a range as is reasonable and come up with a marketing plan to get as high a price — based on my data — as the market will pay. In the end, remember, the list price of a home is not a proclamation of how much the seller wants for the home; it’s part of a marketing strategy to get the maximum the market will pay
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