Chestnut Hill Luxury Market

Recently, The Coyle Group, LLC Real Estate Appraisers & Consultants completed an analysis of the Chestnut Hill Luxury Home Market from January 2000 to the present.

In our analysis, the Luxury Market was defined as the top 20% of single family homes sold in Chestnut Hill. Only sales listed in the MLS were part of the analysis. Private sales and sales occurring outside of the MLS listings were not included.

There were a total of 1,186 single family homes sold in Chestnut Hill since January 2000. This figure takes into account all price points. The top 20% (totaling 237 sales) were included in this analysis as the Luxury Market. Below is a graph of the sales activity that was tracked along with a trend line that illustrates the overall trend for the Chestnut Hill Luxury Market over the span of more than 9 years.

The bottom of this segment began at $675,000 and topped out at $3,300,000. The average sale price over the entire time period was $1,060,840, with a median sale price of $912,000.

One of the metrics that were tracked was the List Price to Sale Price Ratio. The cumulative average LP/SP ratio was 96.14%. This means that, on average, since January 2000, homes in the Chestnut Hill Luxury Market have been discounted approximately 4% from their most current asking price. The time period with the most full or over full price sales was between 2004 and 2007, totaling 53. The time period with the fewest full price sales was from January 2008 to the present. In that period, there were only 9 sales that went for full price.

Observing the trend line, the Chestnut Hill Luxury Market appears to be leveling out from the highs of 2006-2008 and more recent declines through the end of 2008 thru 2010. The trend even shows signs of incremental upward movement. This is positive news for this market. However, looking at the historical data the current market is roughly in line with the market from Spring 2005.

The Coyle Group, LLC is a group of professional Real Estate Appraisers and Consultants serving the Greater Philadelphia markets, including Chestnut Hill. For more information on our services such as Pre-Listing Appraisals, please contact our office at 215-836-5500 or visit our website www.thecoylegroupllc.com .

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Price vs Value

I was invited to speak at the monthly meeting of local Caldwell Banker Agents and Brokers. I was there to discuss the appraisal process, recent market trends and how the HVCC is affecting agents and their clients.

After speaking, I opened up the floor to questions. One of the first questions was a great one. The agent asked me to explain the difference between Price and Value. I’ve been thinking about it and have come up with the following explanation.

When viewed against the backdrop of recent marketplaces shifts both locally and nationally over the past few years, the difference between Price and Value has become more and more important to understand. In fact, I feel that most Agents and their clients are using the terms incorrectly.

When discussing a property most Agents and their clients are thinking in terms of price. “What is the price of the house”, “will they come down in price”, “that price is high/low” and my favorite “did the appraisal come in at the selling price?” The fundamental problem in these scenarios is that it is not about price, it’s about value. The focus should be on what the value of the home is, not the price. Value takes into consideration today’s market and underlying market conditions. Price often does not.

Price is a marketing tool. By setting a price, the Seller is actually choosing a segment buyers who will hopefully see the price as being the value of the property. The closer the Seller positions the price to the true value of the property, the larger the pool of potential Buyers the house will appeal to. Just the opposite is true, as well. The further the price is placed from the actual value of a property, the smaller the pool of buyers who will see that value.

An example of this was this property in Gladwyne. This property was listed in 2009 for $19,500,000. It was eventually withdrawn from the market. In 2010, it was re-listed for $17,900,000. All totaled, the house sat on the market for more that 660 days.

This is a situation where the Seller priced the house so far above the perceived value placed on it by the market, that they effectively diminished the pool of potential buyers to zero. This market did not support the price that was being asked

Remember value is guided by the market. Price is guided by the individual Selling the property. If the price is not supported by the market, no sale will occur.

Common perception is that price and value are interchangable. They are not. Value relates to what something is really worth.  That is, what could one expect to receive in terms of money in the free market?  It doesn’t matter what the value was last year, last month, or even last week. Value is determined by the conditions and influences of the current marketplace. Too often, sellers get hung up on that fact when the marketplace moves in the other direction. They don’t want to acknowledge the fact that their home was worth $800,000 a year ago and, based on supply and demand, is only worth $700,000 in today’s market. Value is determined by the scarcity of something and the ease of replacement with similar, equal, or better products or service (i.e. The Principle of Substitution).  In its most basic form, this is a simple function of supply and demand.

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