Each month, analysts eagerly await the renowned Case-Shiller Home Price Index report to get a read on the health of the housing market. In a nutshell, this report looks at price changes in homes month-over-month. Prices are tracked in 20 major metropolitan cities across the county, providing a “national” view of the market.
I’ve always wondered why price changes in a handful of cities serves as the barometer for our industry. It’s easy to be blinded by the “bright lights, big city” dazzle of it all, but not everyone lives in a major metropolis. In fact, with an estimated 75 percent of Americans living in the suburbs, it’s just as important to understand market dynamics OUTSIDE the big city limits.
You know the adage: real estate is local. Individual real estate markets vary based on a number of factors from jobs, to proximity to transportation, to schools, to crime rates, to availability of housing stock, etc. So while things may be booming in your town, just a few miles up the road, market conditions could be considerably different.
That’s why looking at many different markets can provide a more nuanced, holistic view when it comes to gauging the health of the industry.
For instance, Bakersfield, Calif., is finally transitioning back to a traditional sales market (a change from the distressed properties that dominated the market for the past few years) with more equity sales and move-up buyers. According to Ken Carter, president of Watson Realty ERA, there are some interesting dynamics at play in his market: inventory is up but homes are selling faster at a higher price than a year ago, because pent up demand is keeping up with the increases. But with just 2.2 months of inventory, it’s creating a market with a lot of momentum. Days on market are down 30 percent for the third quarter and the average closed sales price is up 15 percent vs. one year ago.
Back on the East Coast, in Hartford, Conn., we see something different. Joanne Breen, broker/owner of ERA Sargis-Breen Real Estate Co., reports that inventory is low in her market, but that prices are stable. Very small price increases of about 1 percent year-over-year reflect a stabilizing market with lots of room for improvement. That’s why buyers are taking a wait and see approach, which is playing out in the low inventory/stable pricing dynamic. If buyers were more active in a low-inventory market, prices would be increasing at a greater rate. Another bright spot: houses are selling faster compared to a year ago. It will be interesting to see what the spring selling season brings to Hartford. . .
Heading north to central Massachusetts, reduced inventory is resulting in increasing prices and more sales than this time last year. Sales are up about 11 percent over last year and prices up about 5 percent. Bruce Taylor, president of ERA Key Realty Services in Whittinsville, Mass. is seeing great variation in activity, mostly driven by proximity to Boston. Any towns within commutable distance to Boston are seeing greater activity, lower inventory and rising prices.
Cities are sexy, no doubt. And everyone has heard of them. But it’s time to forgo the “bright lights, big city” approach to talking about the health of the real estate market and expand our horizons a bit by turning an eye toward the suburbs.
If you want to buy or sell, or just find out what’s happening with real estate in your area, the best thing to do is contact a local agent.
And if you’re an agent, extend our snapshot and tell us what’s happening in YOUR market in the comments section below.
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