We’ve all heard the saying “two steps forward, one step back.” Whatever mountains are being moved, every bit of progress meets with setbacks that inevitably are followed by more progress. Since 2019, the real estate market of Chester County has sprinted along the route of progress. Most recently, it took those two steps forward, then just one-half step back before springing back into forward motion.
In our data driven world, COMPASS RE has the tools and data that empowers agents like me to stay on the cutting edge of real estate. I’ve included links to their 2022 market report for our area below, and want to take some time to say, in my own words, what all of this means for Chester County. CEO Robert Reffkin outlined what the data means to him on CNBC. The market report focuses on three data points: total sales, average sale price, and days on market. While some of these numbers can look intimidating, I’m a phone call away from answering your questions.
A popular metric of discussion in headlines and on talk shows, the total number of real estate sales throughout a year is often touted as the baseline comparison point to indicate how well the housing market is doing. It makes sense: if more real estate sales are happening, then the market must be doing well. And in many more historically average markets, that’s often how it’s worked.
The times we live in don’t fall under that pattern, however, and like so many pieces of age-old wisdom, the usefulness of total sales comparisons is coming into question. In this market report, for example, we can see that less sales happened in 2022 compared to 2021, leading to many popular headlines’ proclamations of doom. In perspective, don’t forget that 2021 was statistically the best year of real estate ever.
When we take a more comprehensive look at the real estate market data, we get a fuller picture that tells us actually useful information. The decreased sales have been influenced by many factors, chief among them in 2022 the FED’s increase in interest rates. Even with that shock, the real estate market has not had the opportunity to rebalance and restock its inventory. So far this year, the real estate market has remained highly competitive for buyers and sellers alike.
Average Sales Price
A measure of the average sale price of real estate transactions in a given area over a specific time period, this metric is pivotal in understanding what a property in an area might be worth. While looking at the average doesn’t take into consideration any of the specific, amazing details of a given home, it does help set ballpark estimates and form a baseline of expectation.
This metric has remained useful for tracking how an area’s properties have changed value over time, as well as for comparing multiple areas. For example, we can see that the average sale price is higher in West Chester than in Phoenixville, and that both areas have increased average sales prices by a similar dollar amount between 2021 and 2022.
All the same, unprecedented factors have brought something new to what this statistic can tell us, particularly in combination with other market data. The closely comparable price escalation between Phoenixville and West Chester, when compared with the year-over-year difference in transaction volume of those same areas, adds insight into how both markets are equally competitive.
Though asking and closing prices have taken a half step back since their historic 2021 highs, they’ve certainly taken more than two steps forward since 2019.
Days on Market
The average total number of days properties spent on the market is another goldmine for headlines. Fueled additionally by reality TV, this datapoint often misleadingly sets up buyers and sellers alike. Led by the promise of lower sales volume to expect lower competition, consumers are likely to be disappointed by what, historically, would still be considered a very short time on the market.
As with all data, this statistic becomes meaningful when compared with other metrics. Comparing average days on market along with overall sales numbers, we see both were lower in 2022 than in 2021 while average sale price was up over the same period. This tells us the market in Chester County is still extremely competitive and highlights the importance of being prepared to act when opportunity comes knocking.
Check out the 2022 Suburban Philadelphia Market Report by COMPASS RE!
Reach out if you’d like to know more about what all this means for you and your real estate goals.
All the best retrospective data-driven analysis can tell us what did happen, but only current, local data can tell us what is happening in the area that matters to you. Looking at this week’s Bright MLS market report as an example, we can see January has not been as idle as headlines and history would have us believe.
The week-over-week analysis ending January 22, 2023, shows us the trend of increasing days-on-market is reversing while the number of property showings increases. Along with less price reductions, these data points show us the spring market is starting up soon, if it hasn’t already. The market didn’t get to take a whole step back before continuing forward.
A Cautionary Tale
If this story teaches us anything, it’s to be aware of the limits of information. Even as we look at data for Chester County as a whole, the particular conditions in your neighborhood will be specific to your situation. Accurate and applicable information is key to making good decisions, while irrelevant information can be misleading.
To help estimate your equity position, contact me for a data driven analysis!