Fans of The Hunger Games will be familiar with the line, “May the odds be ever in your favor.” This refers to the characters’ odds for survival. Over the past few months, we’ve concerned ourselves as to whether the odds will remain the seller’s favor. Based on the numbers just released for the month of April, the answer is largely yes.
Home prices hit a record high yet again in April, edging up ever so slightly to $576,525. The average Staten Island home sold for about $2,000 more than it did in March. List-to-sell ratio also went up for the first time since July of last year and is up almost a full point since the prior month at 97.6%.
We have observed a trend over the past eight months regarding days on the market, which had been rising steadily. But last month threw us for a loop- the average days on the market was just 75, down from 89 in March. In fact, days on the market were down a full 20 points since last year. The average home took 95 days to sell in April 2017.
However, our predictions about price increases have remained fairly accurate. Based on the growing population in Staten Island and the low inventory, home prices are unlikely to fall significantly anytime soon. Our previous prediction that prices would continue to increase, but at a slower pace, holds true still.
An even more startling trend emerges when we examine price reductions over the past six months. Since October, price reductions have been shrinking sharply. For homes that did have their price reduced last month, this price reduction was only $38,336 on average. But six months prior, the average price reduction was $51,619. Every month since has experienced a consistent downward trend.
Could The Market Be Affected By Speculation?
But when we take a look at new listings and total sales, something looks amiss. Only 328 homes sold in April. Considering there were 669 new listings and 1,630 total active listings, both up considerably since last year, it is strange that monthly sales are this low. Prior to the housing crash, it was not uncommon to see 700+ sales in a month.
This suggests that a large number of homes on the market are undesirable and therefore not selling; unsold homes do not factor into these statistics measured by SIBOR. Most of these homes are overpriced, and this factor is inflating the value of other homes currently on the market.
Price speculation can cause a false sense of higher value. Think about it this way: an old baseball card identical to one you own is listed for sale on Ebay for $6,000. After seeing this, you may tell your friends that your card is worth $6,000 today. Never mind that the item won’t sell for anywhere near that- it may only be worth a few hundred dollars to the consumer. Other collectors may start to overvalue their own items too when they see the list price.
So while we see homes selling quickly and fetching high prices in Staten Island, the sample size of 328 homes is rather small. Overvalued homes that do not sell are effectively removed from the market. In a way, this puts a further strain on available inventory. These homes, in essence, do not count as marketable inventory because they do not generate interest from buyers. Some of those 328 homes that do sell may have inflated prices due to overvaluing of the active unsold listings.