Property Values Continue Upward Trend

Every month, we study real estate sales data for the most recent 12-month period and compare that data to the same period last year in order to spot trends and make projections. Our most recent study was for the 12 months ending on January 31, 2019.

We look at a variety of information like total dollar volume, numbers of units sold, inventory, etc. But the numbers that stood out this month were average and median prices for waterfront properties. Those numbers are interesting because they continue to out-perform historic norms for real estate.

The term for increase in value for real estate is appreciation, and many studies have been done on average annual appreciation rates. Some, like the Federal Housing Finance Agency (FHFA), suggest that annual appreciation for real estate is in the 3% to 5% range. So when we notice that the average increase in sales price for single-family homes on Lake Martin increased year over year by 12.9% to $712,431, that caught our attention.

A safer measure of increase in value is the measurement of median prices. This is a good way to look at how all property values are moving. Like average prices, median prices had a healthy increase of 9.1% for single-family waterfront homes. The current median price for waterfront homes is $600,000.

As impressive as the waterfront home value increases are, waterfront lot values are rising even faster with average prices increasing 37.5% and the median price increasing 57.8%.

Value increases are a continuation of a trend

The increases we note above are not a single-year anomaly for waterfront homes. This same reporting period last year indicated an average price increase of 16% for single-family homes. Lot value increases were lagging last year, and we predicted that higher home prices coupled with lower levels of inventory would cause potential lake owners to consider a lot purchase with custom home option.

That trend played out with increases in values, lot sale counts and a 48% increase in total dollar volume of lot sales over the same period last year. We do not see that trend reversing soon since the fundamentals are unchanged.

Market predictions

While the overall economy is a driver of our market and values, supply is the biggest driver. As noted above, lower inventory levels for the past two years have created fewer choices for more potential purchasers. That supply/demand relationship has driven up prices.

With the increase in prices, the overall number of sales has decreased in single-family homes year over year. Sales for January and February, however, hardly the traditional peak period, have been brisk with 32 properties going under contract between January 1 and February 20. Single-family homes are selling 43 days faster (141 days on average versus our normal 180) than this same period last year.

We think that 2019 is a great year to sell a waterfront home, but a bit of a challenge to purchase one due to inventory levels. Fewer choices, while very attractive with greater buyer interest, will continue to challenge prospective purchasers. We recommend that anyone interested in a lake home pay attention to newly listed properties. Chances are they will not last long, assuming they are properly priced.

Builders are working hard to create new designs for house-and-lot packages. New homes are selling in many cases before they are complete, and builders are proposing house designs for selected lots. Our Sales Executives keep tabs on new offerings – call them at 256.215.7011 to find out more about new builds or new listings.