How many sales would you say, at least on average, it takes to create a trend? Certainly it can’t be one sale, and rarely would it ever be two. It isn’t just the number of sales that matters, but also the spacing of those sales. Three sales might create a trend, but not three sales spread out over three years. Those would just represent normal sales, with each one tied to the other with a clumsy, rather loose knot. And it’s best we discuss the normal, historical, absorption rate in the market we’re considering the trend in. If three sales over three years is average, then maybe we’d need three sales in one year to create a trend. Then we’d have higher than average volume crammed into a very short period of time. Yes, that’s what we need if we’re hunting for a trend.
I hunt mostly mushrooms and trout, but I also hunt trends, and I must bashfully admit that I’m better at the trend hunting than I am at the mushroom and trout hunting. Especially during a petulant winter such as this one, where morel season appears to be on a collision course with the fourth of July, at earliest. That aside, the hunting of trends is easy if you know what represents the norm. If we know the norm we can identify the trend based against that norm. This sounds easy, but if you’ve ever spent time in the real estate world you’ll know that even identifying a norm isn’t always a simple task. But here it is, and that’s why there’s a trend that we’ll call out with absolute certainty.
There is a spec home in the South Shore Club on the market. It has been on the market for a couple of years, and while the activity of 2012 sniffed closely to this fabulous home, the calendar turned from 2012 to 2013 with this home still firmly tucked into the unsold category. Last week all of that changed, and there’s a contract on this $3.395MM home (not mine). The contract is not a surprise to me, but it might be to those in the market that haven’t been paying attention. If one sale doesn’t create a trend, then this sale in a vacuum means very little.
Thankfully, real estate doesn’t exist in a vacuum. Real estate exists in context, and in this case there are sales to be coupled together. A year ago, the South Shore Club was desirable to some but largely ignored by most others. There wasn’t an established pattern of value there, which made recognizing such value an uneasy task. The story of what unfolded next is well known. I listed two homes in the Club last spring, and then I sold them both. Another sale occurred too, and with those three sales we established a very reasonable expectation of value. The price range- $3.575MM in the front by the water and $2.5MM and $1.8MM by the pool. The range was established but no value had been tested since that activity that culminated with my $1.8MM sale last August. If there was a trend started last May and continued through last August, this is now a trend that has been reconfirmed and energized with this current pending sale.
At any given point during the past recession there would be as many as seven or eight SSC homes for sale during any given time. Today there are exactly two. My listing for $2.875MM and another for $3.6MM. One fits into the expected sales range, the other does not. There was a time when listings in the SSC were broadcast to the open market at prices that made sense only to the owner. Those were the times before the trend, before the pattern, before we knew better. Today, we know what to expect, and if a price isn’t in line with those cemented expectations then there’s really no reason to talk about it. The pending sale in the SSC fits into the mold perfectly, and will further prove that the sales of the last 12 months are not a blip on the radar, but rather a real, live, trend.
South Shore Club pool photo courtesy Matt Mason Photography.