Hot Zones vs. General Market


A few weeks ago when I came on board I really didn't know much about the real estate market; I just knew how to look at and interpret data.  After 6 weeks at The Jarboe Group and studying the markets in and around Worcester, MA we've spotted some interesting things in Shrewsbury.

Dilemna

How do you spot the geographic areas in a town that have the highest price per square foot, lowest days on market, and highest sale to list ratio?

Solution

We sourced public records in Shrewsbury and sorted them in such a way to create a street by street heat map of where homes were selling the fastest for the most money. We then created 4 geographical zones that had the highest proportion of these "hot" streets to create zones. No, we did not just look for highest Price Per Square Foot (P/SF). I can't go into too much more detail, but if you want to find out more click below.

Why have we dubbed these hot zones? Since 2013 these 4 zones have outperformed the overall Single Family market in Shrewsbury. These areas have obtained 0.68% more of their List Price, are on the market for an average of 8.5 days less, and have an average price per square foot of $211.48 which is $13.75 higher or roughly 7% higher than the Shrewsbury average.

HOT ZONES

Sales:List - 99.21%

Average DOM - 73.19

Average Price/Sq.Ft - $211.48

SHREWSBURY

Sales:List - 98.53%

Average DOM - 81.66

Average Price/Sq.Ft - $197.73

The charts below tell an interesting story about the Shrewsbury market and these hot zones. Taken individually these three charts each tell a slightly differnt story but when looked at as a whole something stands out.

shrewsbury_PPSF.JPG

One thing is for sure; the Hot Zone areas always generate a higher price per square foot regardless of other factors. What is interesting and possibly somewhat concerning is that in H1 2017 these hot zones may have cooled off. Since H2 2015 Shrewsbury has been relatively stable/increasing on a P/SF basis while these hot zones have been falling. Further in H1 2017 Sales:List for the Hot Zones is now below the Shrewsbury average with Average Days on Market (DOM) has shot up.

The last time Average DOM crossed above the Shrewsbury average in H2 2013 Sales:List shot up rapidly as well as P/SF. This rapid incresae in P/SF led to the higher Days on Market, but Buyers were paying above List Price to buy those homes. It would appear that the psychology of the Buyer was that they were scared they were going to miss out and need to pay more in the future for the same house. Unfortunately, this does not seem to be the case in the curent market.

Flip the above scnario to H1 2017 and the data tells a differnt story. Average DOM has shot up above the Shrewsbury average, but this time Sales:List Price has plumetted and P/SF is down slightly. Even further concerning is that the properties on the market currently in these areas have a P/SF of $204.49 which is below the average P/SF of the overall Shrewsbury market of $206.00.

What does this mean? Is this a leading indicator of the overall health of the Shrewsbury market? Or is it just an anomoly?

Truth be told, no one really knows. I would say it's a sign of caution. One in which Buyers may have reached the end of the rope with declining inventory and rising prices bringing the actual transaction count down and the market to a standstill. If this continues I would expect to see a flurry of price cuts, and a rush of sellers who were waiting for the top come on the market flooding inventory creating a self fullfilling prophecy that the top has been reached. We need to see how the end of first half of this year plays out and then we will get a better idea of where we are really headed.

-Alain Digon, Data Guru & Director of Implementation


NOTES:

  1. The data is lumped into 6 month increments. Thus, H1 2016 for example means those properties sold from 1/1/2016 to 6/30/2016.
  2. The 'Hot Zone' data appears quite volatile because there are only on average 16 properties sold in a 6 month period in these zones. For example in H1 2014 there was a property that had been on the market for 703 days, thus massively skewing the Days on Market higher by a significant amount (about 30 days).
  3. H1 2017 is not complete as of yet, thus that data is subject to change and will be updated accordingly.

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