The first quarter of the 2015 Berks County real estate market is already in the books. My how time flies. So how did we fare? Let’s find out…
Before we get to the whole first quarter let’s take a peek at the month of March. March 2015 was the best month year over year we have seen in some time. Settled single-family homes were up 25.1% (319 units) over 2014’s count of 255 units. While the 2015 number was greatly better than 2014 it was still 4 units behind the 323 units sold in March 2013. This does more to illustrate how bad home sales were in March 2014.
The single-family median price jumped to $147,000 for March which was 5.8% above the mark of $139,000 in March of both 2013 and 2014. This is especially good news considering the precipitous drop of 13.3% (February year over year) we experienced just last month.
The trending drop in overall home inventory continues to drop. March 2015 showed an inventory volume of 2,523 homes which was 6.9% lower than the 2014 number of 2,709 homes.
It is about time that the low inventory we are seeing in the Berks County home market has a positive effect on prices. This along with low interest rates, approximately 3.79% for a 30 year fixed mortgage, according to Bankrate.com, and some reasonable spring weather will hopefully keep home prices moving in a positive direction.
Quarter #1 ~ Berks County Real Estate Market Statistics
One of the realities of most real estate markets is that they tend to move at a very slow and methodical pace. One good or bad month does not a market make. This is especially true in Berks County. We seem to avoid the wild highs and crushing lows seen in different real estate markets around the country. While the month of March was a blessing compared to the January and February numbers the cumulative was not that striking.
The graph below shows the median home price in Berks County dropped to $136,000 or 4.4%. The average sales price was better than the median at $147,759 or a decrease of 3.1%. Okay, so what is the difference between the median price and the average price?
Let’s start by discussing the “average”, also known as the “mean”. Compose a list of the price of each sold home. Next, calculate the sum by adding up all sold prices. Finally, divide that sum value by the total number of sold homes. And there it is. It is actually simple mathematics.
The median price, takes a bit more of an understanding to calculate correctly. For this one needs to arrange the prices of the sold homes in order from lowest price to highest. Once that is done, find the value that’s in the exact middle of the list. That value is the median asking price! But wait, there’s more to it. What if we do not have an exact middle? If our list has an even number of prices, our list will not have a single middle value, but rather we find 2 values that occupy the middle space. In this case, we take the average (add both numbers and divide by 2) to get the median value for the entire list.
Median values show a more accurate view of the market since they are typically less affected by large deviations in the data. For example, let’s assume that your data set includes 5 properties, as shown below along with their respective asking prices.
Property #1 … $350,000, Property #2 … $370,000, Property #3 … $310,000, Property #4 … $1,200,000, Property #5 … $335,000
The first thing you notice is that one of these things is not like the others. Property #4 is priced much higher than the rest. This will have a significant affect on the average value, which happens to be $513,000.
To determine the median, we first sort the list in ascending order, then pick the middle value, which is $350,000. Comparing it to the average, the median value is a much more realistic interpretation of a real estate market.
Next on the chart we see the percent of the original price received. This is an indicator of how much seller’s have negotiated off their asking price. The example is this…A seller asks $100,000 for their home. The negotiate with a buyer and take $90,700. This is $800 less than they would have taken in the first quarter of 2014.
For years prior to the new economics created by the market bust the percentage held quite firmly at 2.8% in Berks County. This is very indicative of a declining real estate market. Home owners price their home where they feel it will sell but the market will not bear it and the seller has to negotiate a price drop that is on average almost 10% off of what they were asking.
As discussed previously, the inventory of available homes in Berks County has greatly declined. The chart shows a decrease of 12.1%. That is a huge number! At the same time home sales were up 13.8% and the average time a home is on the market is 122 days which is the same as last year.
The market activity graph shows us that the first quarter of 2014 was not very good. The chart shows that 2015 has more in common with 2013 as it relates to closed sales. The difference is the lower inventory. It seems that more people are willing to sell their home for less in order to get it sold. They are negotiating at around a 10% clip even though all the economic indicators, such as low inventory, low rates point to, what should be higher, if not flat prices. Yet we still have a 4.4% drop in valuation.
The historical median sales price is showing that Berks County real estate market is at the lowest price point since 2007. The good news is that it does show spikes to the upside between quarters 2 and 3 for the past 4 years. Sounds like an opportunity to me. How about you?
Knowledge is power!