Our Edmonton real estate board publishes its monthly news release, announcing how prices and sales have changed month over month and year over year.
Here’s a quote from a recent (May 2, 2017) news release by our board:
“The condominium average price was $257,740 in April 2017, an increase of 6.23% over March 2017 and an increase of 2.32% compared to April 2016.”
And another quote by the Association Chair:
“…the spring buying season is off to a solid start.”
Wow, fantastic! Condo prices are way up and rising, everything’s selling like hotcakes, and the real estate market is all ‘puppy dogs and cotton candy’ right? No??? But the press release said…
Wait, hold up, let’s look at this whole ‘average prices’ thing. All the average sale price does is look at all the condos that sold last month, add up all the sale prices, divide by the total number of sales, and voila… average price! The problem with this simplistic view of the condo market is it doesn’t account for different types of properties, doesn’t consider locations, doesn’t look at how much ‘home’ a buyer is getting for their money, doesn’t account for slower/busier markets, doesn’t consider new homes coming on the market and can be skewed by very expensive (or very cheap) homes selling in any particular month.
So, let’s look at some of these issues…
First, type of property… “Condo” is a very broad term that describes a type of ownership, not a type of property. Condos can be low-rise wood-constructed apartments, hi-rise concrete and steel apartments, 2-story townhouses, gated 45+ adult community bungalow duplexes, individual houses with landscaping/snow removal and other benefits managed as condominiums, carriage homes and numerous other configurations. The point is, sale prices can vary greatly from condo type to condo type and any variation in the makeup of what sold in any particular month can skew the overall average price.
Location (which goes hand-in-hand with property value) can also influence average price. Consider a million dollar home or two, sells in an affluent market this month. That will skew the overall average higher. No million dollar homes sell the next month? Guess what happens to the average?
What about the market and how much ‘home’ a buyer can buy? Consider this scenario…
Year One: The market is strong, there are lots of buyers, and nearly every home listed is sold. Let’s say buyers are buying a typical 1000 sq. ft. bungalow for $350,000.
Year Two: People are losing their jobs, the economy is uncertain, there are many people desperate to sell their homes but few people buying. Interest rates have dropped, which means the few buyers there are can actually afford to spend more. So, buyers are now spending $360,000, but because of the desperate sellers, they are able to find 1400 sq. ft. bungalows for that $360,000, while the 1000 sq. ft. bungalow sellers have had to drop their prices to compete.
See what happened there? The average sale price rose by almost 3%. But anyone with a 1000sq. ft. bungalow certainly didn’t see their property value increase 3%. In fact, it likely fell.
The point I’m making in all of this is that the average sale price, at best, is a general, rough, indicator of how much buyers are spending on homes. LET ME REPEAT THAT PART… “how much buyers are spending on homes”. It’s not an indicator of how much a particular home’s value increased or decreased.
So, how do you know what your home’s value is really doing? You talk to someone, like myself, who has plenty of experience and insight into the market, the specific neighbourhood, and the particular type of property you own. As a REALTOR®, I can do a proper market analysis based on your specific home and compare it to properties that are truly like it, not a vague, ‘average condo’ or ‘average house’. If you own a 2-story, 1800 sq. ft. house with attached garage, finished basement, 3 bedrooms, 2 baths, granite countertops and hardwood floors, then that is what we need to compare your home to. From there, we look at factors such as market strength and volatility, location, condition and more to get a true picture of what your home is worth.
If you’re thinking of selling your home and want to get an idea of its value, get started by filling out this short form:
I look forward to speaking to you.
Jason Hafso is an experienced Edmonton real estate agent offering friendly, professional service throughout the entire home selling process. Trust Jason to provide one of the most comprehensive marketing plans around, using the latest technology to ensure your Edmonton area home receives maximum exposure on the market. Hear what his clients have to say: http://myrealhome.com/testimonials/