By Lloyd Sherman, June 1, 2021
I would normally only put out a quarterly report on what’s happened within our real estate market, but I have received several inquiries, so I thought I would provide an interim update for this quarter. Expect my quarterly report sometime in the first week of July.
Information provided comes directly from our MLS (Cooperative Arkansas Realtors MLS – CARMLS) and contains only information from within the Village boundaries. Other sources may be providing their statistics based on zip code and most of them also contain lot and townhome information, which my quarterly report breaks out as their own categories.
This summary of information does not contain sales on townhomes but will be provided in the quarterly report. However, as of June 1, there were only four (4) townhomes available for sale.
Properties sold through 5/31/2021
- 262 for 2021
- Available for sale – 43
- Average selling price – $286,601
- Average price per square foot – $121.32
- Average date on market – 33
- Under Contract – 71
- Taking Backup Offers – 20
Properties sold through 5/31/2020
- 208 for 2020
- Available for sale – 126
- Average selling price – $219,656
- Average price per square foot – $99.14
- Average days on market 77
- Under contract 70
- Taking backup offers 41
Properties sold through 5/31/2019
- 228 for 2019
- Available for sale – 225
- Average selling price – $212,752
- Average price per square foot – $95.42
- Average days on market – 76
- Under contract – 52
- Taking backup offers – 32
What does this tell us?
1) Given that our inventory has ticked up slightly from earlier in the year, it is
nowhere close to where it was two years ago, or for that matter, last year.
Houses hitting the market are selling, on the average, in less than half the time of
the previous two years. In many cases, houses are getting contracts on them
within hours of being listed. In some cases, offers are exceeding the asking price,
and again in cases we have had bidding wars.
2) Both average selling price and price per square foot have increased significantly,
and while the price per square foot has seen an increase, the numbers here
appear to be more reflective of sales in the $300K and above categories. For
instance, in 2020 21.4% of all sales were in the $300K and above categories.
This year’s numbers reflect an increase to 35.1%. The real impact in these
numbers relates to the 16 properties sold in over $600K range with two of those
being over $1 million – 16 in 2021 and NONE in 2020.
3) The reported number above for 2021 includes the sale of 22 new builds that have been closed. Caution: Keep in mind that these numbers only include transactions that have gone through the MLS and as such, the new build number will not include those where lot owners have contracted directly with a builder.
Speaking of Lots
In 2019 through 5/31 we had sold 48 lots and in 2019 and 45 in 2020. This is significant in this writer’s opinion. In 2021 there have been 130 lots sold through the MLS. According to the numbers I reviewed at the end of April 2021 another 21 POA lots had been sold by the Realtor community, and as I recall another 19 through the efforts of the POA. Now on average, it would appear we are clicking along at about 30 lot sales a month. I can remember back a couple of ago years where the goal of the POA was to sell 30 POA lots a year. We are already at approximately 40. A conclusion could be arrived at that due to low inventory, building will continue which is one of the things that needs to happen within the Village.
Opinions of the writer
1) Building – Average cost per square foot is now in the low $150’s, and even up for custom builds. So now for a 2,000 sf house you are looking at $300K. The price
of materials has skyrocketed to the point where some builders can’t calculate a
selling price until the bulk of their materials have been ordered. Will this
continue? Anyone telling you they know the answer, I would love to hear from
them. Inflation is here; how much impact will it have on the building market.
Again, I would love to know the answer.
2) Existing House Sales Market – Once again, my crystal ball is in the shop. What I
can tell you is that I saw a crack in this segment show up last week when I lost a
sale because the appraisal was way too low to accommodate the asking price.
Seller didn’t want to budge and buyer didn’t want to eviscerate their retirement
savings. Comps in the area did not support the asking price, but the sellers are
convinced their house is worth what they are asking. I had one right on the heels
of that transaction which would have resulted in the same outcome. So, if this
pattern continues where mortgages are unobtainable, it could start to cool the
market.
3) Cash Sales – The other aspect that enters the picture is the cash buyer. They
are flush with cash and an appraisal doesn’t impact them, EXCEPT, they have
now locked themselves into houses that may never (or might not for a long
period of time) be worth what they paid for it so they are upside down.
4) How long? – Remember 2008? What happens when a bubble is formed and
artificially inflates anything? We all know that bubble can burst; the market can crash; banks can fail. You get the idea. Is the current real estate market leading
us to another crash? Again, I would love to know. Buyers are only going to go so
far with inflated prices. Additionally, new builds may eventually be impacted by
the rising prices. And how bad will the inflation issue become?
The above represents only my opinions and the questions I have about the current
market conditions and how much further buyers will go before price becomes a limiting decision. The fact that many are fleeing high-density areas and relocating to places like the Village should be a favorable sign for us, but like most things these days, time will tell.
Feel free to reach out to me if I can answer any questions for you.
Note: Lloyd’s email address is: lesherman1948@gmail.com
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Dale Huff
06/01/2021 — 6:31 pm
I wish you could not use the average sales price and instead use the medium, that is a better indicator of the market.
Sam Taylor
06/01/2021 — 11:42 pm
It would still be skewed by the greater number of higher values selling homes. It would be an interesting statistic though to see the number of houses that are valued in the different price ranges. I’m not sure if the “historic” side of the Village homes would still outnumber the more highly valued newer, bigger homes being built in many places in the Village now. I’ll admit that I like new, but I also have a huge admiration of the original Cooper vision for Village housing. Sometimes, I’m not sure if it’s really been an improvement here. It’s kind of lost some of its quaintness.
Lloyd Sherman
06/03/2021 — 7:10 am
I will take your suggestion and start adding the median price to some of these stats beginning with my 2nd quarter report at the beginning in July. Thank you for your interest.
Sam Taylor
06/01/2021 — 6:34 pm
I suspect whatever you’re using instead of your crystal ball is pretty accurate, and that you’ve made some excellent observations. Right now we are definitely in a seller’s market, but I also believe that this can’t continue for any prolonged time without some adverse effects from these unnatural increases that we’re experiencing. Personally, I hope that I can benefit from this when my Village and my Texas homes go on the market, and that I can hold off long enough before having to “buy” something closer to our children. It’s definitely a dice roll, and I’ve never been much of a gambler. It is great news for the Village that there are so many lots being sold with new builds in the more immediate future versus those that buy a lot and plan to build when they retire 10-20 years out! A bird in the hand… comes to mind! Those extra POA dollars through dues will be of benefit to the Village! Thanks Lloyd for this extra report!
Tom Blakeman
06/02/2021 — 6:46 am
I know you are busy but a couple of additional things would be really good to have: 1. As noted, a median value for the various items. 2. A graphical representation of all those stats going back 5 or 6 years.
Maybe on your next edition. Thanks for all your good work.
Lloyd Sherman
06/03/2021 — 7:12 am
Thanks Tom. Will add the median info on the next report. I will try and get to adding another two years to the report format to cover a five year span.
Brian Castleman
06/02/2021 — 2:26 pm
Good analysis. Yes we remember when the real estate bubble burst in fall of 2008. Properties stopped selling, developers, builders went bankrupt. Some homeowners lost their homes. Some banks failed. As a commercial lending officer I went from making loans to becoming a full time
loan workout specialist. This lasted almost 6 years. Lending and appraisal practices were revised. The industry got back to more sane and prudent procedures, practices.
Walter Chance
06/02/2021 — 8:29 pm
Thanks Lloyd. As a builder I am reading the National Association of Builder updates weekly. First, material costs continue to rise, lumber 300% in the last year and a half. Over the last month lumber futures for August have dropped 27%. So this may be a turning point. There will be pull back where rising interest rates and pricing pressure will cool the market. 2008 is not the same as 2021 in many ways. The bubble in 2008 was due to fraud, easy banking and lending practices. Unfortunately I lived through that housing meltdown. I personally could borrow 120% of my construction loan. Construction loans and permanent loans have both been drastically regulated since then. The Frank Dodd Bill was a game changer in the mortgage business. It’s much tougher to get a mortgage and the appraisal industry has also been held accountable. The fact that this home didn’t appraise makes me think some of these new regulations are working. Although there certainly could be areas of the Country that will suffer a bubble burst, I think the Village has something going for it if housing corrects. First, retirees do have cash, second, boomers are turning 65 everyday at a rate of 10,000 nation wide. This will continue until 2029. Gen Xers are buying homes finally. The fact that a lot of jobs can be performed from home makes the Village viable for the next generation. I am not saying the market will not correct. But 2008 saw massive foreclosures due to job losses and an economic downturn in the macro economy. If the economy starts to tank. Then yes, things will slow here. But I just don’t see the level of overbuilding that happened in the years leading up to the 2008 collapse. If anything builders are being conservative in putting up inventory . So to have that kind of collapse, one must have an abundance of inventory with no buyers. I know I will not get caught up in having 7 inventory homes with no buyers. (2008)
Elizabeth Hart
06/03/2021 — 10:04 am
The rates of forbearance is 3xs the rates of 2008. With red states cutting additional unemployment & the federal green light for evictions, we should see some real impact from evictions happening in the next 3 months when landlords finally get their properties back. Don’t you think? States drawing remote workers have seen an uptick in home sales, states with great outdoor activities, affordable homes, states like Arkansas. I’m a voyeur of the real estate market 😎 not a mover & a shaker, but I’ve kept a watchful eye on the forbearance numbers across the US.
Also, HSV lost $655,000 in 2021 by not having a $2500 initial membership buy-in/fee on every home purchase. That’s just the home purchases, not including undeveloped lots. It’s amazing to me there’s no membership buy-in fee for the village.
Wes Smith
06/03/2021 — 3:45 pm
Excellent insights into HSV Real Estate Marketplace in lieu of extraordinary Sellers Market this is just what the Doctor ordered to remedy sluggish sales and prospecting to motivate Buyers who were once on the sidelines.
Lloyd as a Market Research Professional I would be greatly interested in tracking these stats
1. How did the Buyers first learn about HSV ? i.e. online, paid advertising, referral , etc ..
2. What were the top reasons Buyer choose HSV ?
3. Where did buyer move from ?
4. Was HSV first choice or did they look elsewhere ? If elsewhere , then where ?
This data collection will eliminate a lot of guesswork in decision making by our Advertising Agency and our POA Marketing Department. I could go way further in depth but you get the gest of my survey …
Elizabeth reiterates what I’ve heard from multiple Agents in my area of Jackson, MS there are approximately 6500 homes in forbearance , the number of landlords with tenants is probably even higher in our heavy renters market. As a member of the Real Estate Investment Group in Jackson, MS we are anticipating relief on September 1 as the forbearances will covert into foreclosures and the leases will convert into evictions. We predict the Market will begin to normalize with inventory flooding back onto the Market by 4th quarter of 2021 …
Walter provided some real hard numbers to show the builder side of the equation with some hard facts about what our contractors are facing today. He is absolutely correct in pointed out this is NOT 2008 market bubble which was precisely due to what the Todd Frank bill addressed in this greedy lending , grossly exaggerated appraisals and limited oversight causing the bubble to burst.
Yes 2021 is a crazy world world right now to bid a new built but for totally different reasons than 2008.
As for the construction prices and when they will normalize this is a much more complicated maze of issues … it is obvious that Covid shutdowns in factories, lumberyards, logging etc… crippled the supply chains . Additional unemployment benefits and stimulus money have created a huge labor shortage. Plus I understand many of the regulations President Trump enacted into law to streamline manufacturing and distribution have all been removed by President Biden… The massive influx of Federal cash in the past 100 days into our money supply now has too many dollars chasing too few goods creating inflationary pressures driving up COGS…
It is a real mess if you sell your house that is pretty easy these days but you better be ready to pay a premium for a new build especially or even an existing home .
Could Walter or Lloyd shed some light on how a Contractor can quote a Sales Price on a New Build when they don’t know their own material or labor costs ? How do you sign a contract is it all based on speculation ?? Please advise.
Thanks ever so much to Lloyd for stimulating this very timely and informative discussion. Keep up the excellent work the 3rd and 4th quarter should have some fascinating revelations.
See tomorrow, today !
http://www.mktmixms.com
Wes Smith
Lloyd Sherman
06/04/2021 — 7:10 am
Wes – Good questions as always. I can only report the numbers and make opinions based on my personal experience. ALL of your questions should be directed to and answered by the POA. They are the single point of contact for EVERY transaction. I hope they are gathering this information but because we have a culture of being required to ask for details, the POA’s history indicates they won’t proactively share this kind of information. That information would/should drive how we are handling marketing, but instead, we are left to wonder.
Al jordan
06/03/2021 — 3:54 pm
As a long time former appraiser and assessor I have seen the lag in a rising market where appraisals come in too low. No one complains when they are high. Changes in the appraisal requirements have a damping effect on inflation which is maybe a good thing.
Walter Chance
06/03/2021 — 6:28 pm
Wes, To be honest, pricing a home is a roll of the dice. I start a home not knowing what margin I will make. I am 6-7 months out for a closing. So the answer to your question is I simply don’t know what I will make. I am a conservative builder. 6 homes this year. So I try to price with what the price per foot are closing at today. No comps and you may be holding the bag. So far all homes have appraised. When I apply for a construction loan, the unbuilt home is appraised. So I start with that number and add a little cushion. Certainly not making what I was back in Texas, but enjoying building again less the rain. We are all behind and with this demand, expect delays in build time.
Wes Smith
06/04/2021 — 9:33 pm
Walter,
I appreciate your frankness as a seasoned builder. I didn’t figure there was a clear path for builders given all the material price voiliaty .
I Really don’t envy you facing these uncertainties
I could live with the delays in final product
Even as a Cash buyer without having a firm sales price prior to construction I would not have the risk tolerance to make a real estate deal at this time until the economy stabilizes .
Wes Smith
06/04/2021 — 10:02 pm
Lloyd,
What about cutting to the chase circumventing all these obstacles to information gathering..
Propose the newcomers meeting conduct an anonymous survey to reveal their purchase decision making.
If you can put me in touch with this newcomers group I will provide my companies expertise in questionnaire design ,tabulation & analysis pro bono to you to utilize as you see fit.
I really don’t get this resistance by the POA or theRealEstate Community or Staff or BOD not to want to come together as a team with a common goal to grow HSV.
Whoever the General Manager
hire is must bridge these information gaps if HSV ever hopes to flourish and prosper! Otherwise it’s all guesswork.
John M Szczepaniak
06/14/2021 — 1:10 pm
I find it ironic that we have so many talented highly educated people here that can help make this a better place but we always seem to fall short.