What is happening to residential real estate during COVID-19?
Before discussing real estate price discovery or how we evaluate a home’s likely market price, a brief update on real estate in the stay-at-home, social distancing world we have been in since earlier in 2020 may surprise some. Massachusetts deemed real estate an essential business in March and it has continued to operate in compliance with all social distancing laws. Berkshire Hathaway HomeServices Commonwealth Real Estate’s office is active with listings and sales since the social distancing law by applying technology.
The home sales in my area of the Marina Bay, Squantum, and Merrymount sections of Quincy, MA were twice what they were from March 31, 2020, to April 30, 2020, as in the same period in 2019. The listings of these homes were primarily initiated in April, the average days to offer was nine and the average selling price was 98% of listing price, according to reports from the Multiple Listing Service. This suggests two things: a relative scarcity of homes available for sale and willing, qualified buyers. Neither I nor Berkshire Hathaway HomeServices Commonwealth Real Estate can predict what may happen in the future, but I want to provide facts to keep our clients and prospective clients informed. We can draw inferences about other facts from recent sales and can discuss them with you. I welcome any inquiry for regular updates on your neighborhood or area of potential interest.
What is my home worth?
Homes are often the biggest single investment most have. A home provides many familiar benefits and is not usually viewed as a financial asset, but a long-term domicile and center for our lives. Given the stay-at-home protocol since early March the protective value of one’s home is a dimension that has come into sharper focus. Although homeowners may well have no interest in moving or selling their homes, an appreciation of the state of the values in their area is usually of interest.
There is little price transparency in home values, unlike financial assets like stocks where we can see accurate market values every minute of the business day. Of course, each home is different so it requires a customized valuation approach. Various websites offer information about homes and their estimate of the home’s value. These estimates may be accurate, but qualitative differences may not be evaluated in an online estimate. There can be significant differences between homes with seemingly similar features, like the living area, the number of bedrooms, bathrooms, location, etc. Such differences can make value comparison by a computer algorithm difficult. A variety of factors influence supply and demand and a shift in either factor can be expected to impact transaction prices of homes. The fact is that price of a home is determined by a willing seller and a willing buyer.
We apply a systematic and disciplined approach to estimating the likely market value of a home using comparable transaction prices and other publicly available data. We overlay the current market condition in consultation with our colleagues who have demonstrated acumen over many years in our market. The real-time perspective and knowledge of a specific area or neighborhood are of value to our clients. Our goal is to generate estimates of market value that accommodate the current state of the market and ideally are ahead of new trends.
If one considers selling a home, we explore the pricing strategy with the homeowner based on our estimates to develop a marketing strategy with a structured plan to sell the property. It is vital to determine realistic expectations if one wants to market a property. The reality of personal real estate decisions is that they often are influenced by emotional responses to a property. As with my role as an investment manager, my single biggest objective when working with clients is to manage expectations and to remove or at least temper emotional response. Such emotion is a good thing if people keep it in perspective in their decision to buy or sell a home. For those interested in buying, we provide perspective on a variety of vital factors that they should consider and discuss this in my website and in Berkshire Hathaway HomeServices Commonwealth Real Estate publications provided on my website. Our goal is to provide facts and perspective to inform our clients. We are part of the largest national real estate company and have significant resources beyond the 600+ agents in Massachusetts.
One of the principles that are held by our founder, Warren Buffet, when talking about stock values is that a market is a voting machine in the short term, but a weighing machine in the long term. Some stocks become wildly popular and perform much better than others until the popularity wanes or their prospective fundamental progress declines. What is important for an investor or homeowner to know is that they must assess the intrinsic value of a property. This raises an interesting question about home value now, but also in the future. Although as mentioned, we cannot predict the future, we can review those factors that may influence future value. My career as a registered investment advisor provides me with an uncommon perspective on price discovery and I would be pleased to discuss my perspective on home marketability with you.
May 14, 2020
Sales Associate, REALTOR
Berkshire Hathaway Home Services Commonwealth Real Estate