August 14, 2024
I analyzed the market data for the past four years from today, for the neighborhoods of Watch Hill, Weekapaug, and Avondale, which are all part of the Town of Westerly. From this data, I believe the market has softened with properties staying on the market for longer, and more properties reducing their asking price.
With any market shift, you must figure in the market's direction before placing a value on the property. Traditionally every real estate agent does a ‘CMA’ - Comparative Market Analysis – to justify their pricing valuation. The problem with CMAs though is that they use ‘historical data’ - i.e. OLD data. If the market is transitioning currently – from a Seller’s market to a Buyer’s market – you cannot use old data. If you use old data, and the market is softening, then your pricing will be too high.
In the below summary you will see mention of ‘Days on Market’ (DOM). This is a common stat often used in real estate analysis, but it is flawed and should not be a major indicator as it can be gamed. Often properties on websites seem to have a short DOM time frame, when they have been on the market, taken off the market, and then put back on and resetting the DOM clock.
For this reason I prefer the two ratios to analyze Sold properties:
- SOLD price / Assessment
- SOLD price / Square Footage
For Active properties, I like to incorporate the Listing Price / Assessment ratio and compare these with the same ratios for the Sold properties. This gives me a better idea of where the Seller’s pricing strategy is.
Below is my analysis, if you have any questions please contact me.
Analysis Summary:
- Days on Market (DOM) for Sold Properties:
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- 2020: 109.73 days
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- 2021: 103.83 days
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- 2022: 32.67 days
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- 2023: 21.54 days
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- 2024: 25.29 days
Observation: The DOM trend shows a significant decrease from 2020 to 2023, indicating that properties were selling faster each year, particularly in 2022 and 2023. However, in 2024, the DOM has increased slightly to 25.29 days, which, while still low, suggests a potential slowdown in the market compared to the rapid pace of the previous years.
- LIST / ASSESSMENT Ratio:
- Active Properties: 191.63%
- Sold Properties: 178.00%
Observation: The LIST / ASSESSMENT ratio is higher for active properties compared to sold properties. This suggests that current listings are being priced more aggressively, possibly in an effort to capture higher values despite the slightly longer DOM. However, the lower ratio for sold properties indicates that buyers might not be willing to pay as much relative to assessed values as they were previously.
Market Condition Assessment:
- Potential Market Shift: The combination of a slight increase in DOM for 2024 and higher LIST / ASSESSMENT ratios for active properties could indicate that the market is indeed shifting. The increase in DOM, although slight, suggests that properties are taking a bit longer to sell, and the higher listing prices might reflect sellers' expectations that are not fully aligning with buyer willingness to pay.
- Seller's Market to Buyer's Market: The data supports the impression that the market might be transitioning from a seller's market to a buyer's market. Properties are on the market longer, and there is a discrepancy between the listing prices of active properties and what has historically been achieved with sold properties.
Conclusion:
The current market conditions suggest a potential cooling from the extremely hot market seen in previous years. Properties are taking slightly longer to sell in 2024, and the higher LIST / ASSESSMENT ratios for active properties could indicate sellers' expectations might be ahead of the market reality, pointing to a possible shift toward a buyer's market.
