Hi neighbors! I thought it was time someone did real math for our neighborhood to answer the question: Is the market correcting?
I defined Garden Acres by the boundaries of Spencer St, 17th, Fancis, and 21st St. Please note that there is a 55+ community that is NOT included in this data set.
When we talk about a “correction,” we are really comparing today’s market to the unique frenzy we saw during the pandemic. Therefore, I divided the last decade into three periods: Pre-Covid (2016- March 2020), Covid (April 2020-March 2022) and Post-Covid (April 2022- Current). Additionally, I corrected the price/sqft to EXCLUDE any concessions paid during the sale and to only measure finished squarefootage. This should provide a clearer picture of value over the years.
The graphs above show the “rate of apprecition” measured by price per finished squarefoot (f-sqft). Mathematically, the slope of each line is the measure of how fast values are increasing/deacreasing. Pre-Covid (blue), we saw a daily appreciation of $0.04/finished square foot per day, or $15.66/f-sqft annually. During the Covid(orange) frenzy that rate more than doubled to an average gain of $38.03/f-sqft per year! Today (green), we are losing some of that appreciation, but at a slow rate of -$8.72/f-sqft annually.
Another aspect of these charts I’d like to mention is their volatility, or fluctuations. Visually, it appears that there were less fluctuations during the Pre-Covid and Covid eras vs today. These fluctuations can be measured using R2: The higher the R2 the less fluctuations and vice versa.
Pre-Covid and Covid R2 values are 0.14 and 0.16 respectively. Post-Covid, the R2 value is 0.0054, which is effectively 0. My interpretation of this, is that buyers were less picky about the homes they were purchasing from 2016-2022 because of the extreme competition caused by lower interest rates and a huge pool of buyers. Post-Covid, prices remain high, however interest rates have effectively doubled, not only pricing out many buyers, but resulting in more selective buyers. This smaller, more selective pool of buyers is why some houses in our neighborhood sell for extreme highs, and others for extreme lows.
In conclusion the market is correcting. While the average price/f-sqft is drifting down, individual sales are all over the place indicating that buyers are placing value on factors other than location. I hypothesize that due to high interest rates, buyers are placing a greater emphasis on condition, and that these homes are selling for extreme highs.
If you want to know what your home might sell for in today’s market or have other questions for me you’d like me to discuss text me at (720)807.0414