What’s The Real Value of Your Home? The Smell (It’s a Thing) and Upgrades Are Part of It
Q: “How do you know if the value of your home is a true value? Our home has gone up substantially, but our home isn’t like any other homes on the block.” -C. Forrest
There is no doubt that your home’s value has risen dramatically in the last few years. Much of the appreciation has taken place due to dramatically low interest rates and dramatically low supply of homes to purchase. This has affected all home values, bringing them up 22% in just 2021. As of August 12, 2022, the market is undergoing a shift. Home prices are correcting as interest rates increase.
In early 2021 and throughout the year, rates were in the 2% range, making buying power incredible. One million dollars was the new $800,000. Buyers could afford way more for their money and they weren’t afraid to use that buying power. Couple that with an average of only 47 homes on the market throughout the entire year in Gig Harbor; we saw one of the most incredible markets for sellers ever. Fast forward to today, where interest rates are now hovering around 5%. That changes the value of what buyers can purchase. They are back to $800,000 homes and adjusting their expectations.
In addition we now have about 160 homes on the market week over week. Increasing supply means more options for buyers each week. That puts downward pressure on appreciation and we are seeing a slight downward pressure on home prices, although year over year the prices are still up.
The change occurred most notably in May 2022, when rates rose by 2% virtually overnight and supply tripled in a week. Take Canterwood, for example. On April 27 I listed a home and there was only one other home in the neighborhood for sale. On May 4, only a week later, there were 10 homes to choose from.
This brings us to part two of your question: What about the values of the comparable sales in my neighborhood?
The online algorithms (Zillow & Redfin) are more misleading than ever. They’re a computer looking at old data. The market conditions (interest rates and supply of homes) is dramatically different.
Agents who are not working full time in your area may have their values inflated. The last 30 days is all you should be looking at as the new market takes hold. Prices are still incredible but seller expectations must be met. Your home will likely sit on the market longer unless you have a “unicorn.” We are not seeing multiple offers. We are back to negotiating and a more neutral market where buyers and sellers both have to give a little. If you are doing research, it’s best to look at the pending and active homes on the market right now and compare their values to what yours might obtain.
We track the number of homes on the market, the number of pending homes vs. active to see the strength of the market, and prices and days on market so we can try to triangulate the “sweet spot” for pricing a home. That also means we need to be inside it, something Zillow can’t do. Our office also tours the Gig Harbor market every week, getting eyes on the inside of the currently listed homes so we know how they compare to what we’re trying to price. We see what they sold for. Our office also works with buyers in the market so we know what they are capable of and what the market temperature and mindset of the buyers are when they are house hunting. Recently, many buyers are looking for 1-3% in closing costs. But if you have “unicorn status,” the rules are different.
SPOTTING A UNICORN
You said your home is different from others on the block. A local, full-time agent will know the comps, market temperature, and true uniqueness of the property for the location. We can spot a unicorn. After we do a site visit to get a read on upgrades, the lot, the smell of the home (it’s a thing), size, and layout, we work with you to find comparable properties to help us come up with a price. That exercise is also important when the appraiser comes around.
It can be hard to pinpoint a price, but the best approach is always to price close to market value and let the buyers set the price with interest and offers. If you price too high you’ll be ignored. If you price too low you may not get multiple offers. That’s pretty hard to do, though. Buyers even in the current market can spot a unicorn. I would say about 20% of homes listed now with view or land are still obtaining multiple offers above ask, but that initial price when listed is paramount in attracting buyers to your home.
It’s always the buyers who set the market. An expert realtor will help you decipher the buyer’s feedback after showings to adjust your strategy as your home is on the market.
I hope this helps. Identifying value is a skill. It takes having boots on the ground to see inside the competition and analyzing data on a regular basis to know the strength of the market to identify how aggressively you can price your home. You want a skilled, smart, local agent to help with that.
Paige Schulte is the founder of Neighborhood Experts Real Estate located off of Olympic Drive. Neighborhood Experts Real Estate is a modern boutique agency that blends local knowledge with high level digital marketing strategies for buyers and sellers.