The real estate market has slipped into low gear because most homes are overpriced. Wouldn’t it be interesting if we could quantify exactly how overpriced the typical home is? Let’s take a stab at it. The simple solution would be to compare the median selling price of homes to the median list price of homes over a 30 day period. But that could be misleading. For example, when interest rates climb, the amount of money a buyer can borrow decreases. The same monthly payment that bought a $400,000 home when interest rates were at historical low now buys a $300,000 home. That creates a shift in demand for more affordable homes. Homes in the $400,000 category may continue to sell at $400,000 in less quantity. But as more buyers buy $300,000 homes, the media reports the median priced home slipped from $400,000 to $300,000. This creates an illusion. The bottom line is that using changes in the median selling price to gauge market appreciation or depreciation is only a general indicator because it doesn’t take into account buying patterns dictated by economics and changing trends. We need another baseline. Each year, the county appraiser determines the market (just) value of each property. These values are influenced by sales of comparable properties, not by the median selling price of the overall market. That gives us a more stable baseline because it’s tied to the value of each individual property. It’s a better baseline because it’s not directly swayed by economics and trends the way the median selling price is. I researched 30 single family homes that sold within the past 30 days using the Englewood Area MLS system and the last certified tax rolls published by the Charlotte County Appraiser. The results were quite revealing. For each home, I determined the “markup”. The markup is the percent over the just value at which the home sold. The median markup on the homes that sold was 8 percent. In other words, if you rank the sold homes by their markup, the median markup is eight percent over the just value. I did the same for the homes that are still on the market. There was quite a difference. The median markup on those homes was 32 percent over the just value. That’s the answer. In general terms, the typical home that sold was sold for 108 percent of its certified just value. The typical unsold home is priced at 132 percent of its just value. Mathematically, 132 percent is 22 percent higher than 108 percent. This indicates that, in the area I researched, the typical home is currently overpriced by 22 percent. That’s quite a stalemate. Brett Slattery is a Realtor with Keller Williams Realty. His contact, web, and blog are at www.BrettSlattery.com.
