What Is a Good Year, Anyway?

January is a month that looks ahead. A new year means new plans, new resolutions, a new trip around the sun. Mentally, we are more likely to think we are starting over and that the tabula is rasa.

Gone are the days of December, the days of looking back and wondering… have I been good enough? Will Santa think that I have been a good boy or girl or a bad boy or girl. And what is “good” anyway? Will Santa understand if I had a few slip ups as long as I sincerely apologized?

Similarly, at the end of a real estate year it is normal to wonder if it has been a “good” year or not. Well, has it been a good year for Lake Martin waterfront sales? Let’s take a look. As of this writing, the sales have been accumulated officially through the end of November, so we should have a pretty good estimation. I pulled all these numbers from the Lake Martin Multiple Listings Service, or MLS. The MLS has sales from every single agent, every real estate brokerage on the lake. They don’t include private sales from developers or For Sale By Owners, but I think it represents a very, very high percentage of waterfront transactions.

Here’s a chart that shows waterfront home sales through the end of November, 2019. The MLS shows that 342 homes were sold through November 30th. If we compare that total to the previous for years, we see that 342 is a record high. It bests 2017 by two sales. This is significant because the calendar year of 2017 holds the record of waterfront sales. So, for 2019 to be two sales ahead after the end of November is a pretty big deal.

What will happen in December? Does 2019 have a chance to maintain its lead and become the top waterfront home sales year ever? There were sixteen sales in December of 2017. As I write this article in the middle of December, 2019, the MLS has recorded about half of that. Given that many more are listed as pending close and will probably close by the time this article is published, I think it is safe to say that 2019 will end up being the top year of sales. If not the top, it will be close enough so as not to matter.

This next chart shows the sales activity in the Lake Martin MLS for waterfront lots. The story is a bit different here. Through the end of November, 2019 is not vying to be the top year for waterfront lot sales. The top sales honor for lots goes to 2015.

In fact, 2019 will probably not even be in the top five of best waterfront lot sales. That is a pretty curious thing to me, actually. The conclusion that I make is that waterfront home sales activity and waterfront lot sales activity are not necessarily tethered. The fact that 2017 and 2019 can be so excellent for homes yet so average for lots drives that point home to me.

Do we have enough information for a verdict yet? Was 2019 a good year at Lake Martin? Let’s keep looking.

Another way to judge the strength of any market is to look at the relationship between sales and inventory.  I have said it in these pages before and I will say it again – to look at sales without considering inventory is only a partial analysis. The vice versa is true also.

That is why I think it is important to view both sales and inventory at the same time. One common way that the real estate industry, in any market, likes to analyze the relationship is a statistic called “Months of Inventory,” or MOI. The way you calculate MOI is to take the current month’s inventory (homes or lots for sale) and divide it by the current month’s sales. In plain English, MOI answers the question, “If our market keeps selling homes at the rate it did this month, how many months would it take to totally sell all the homes currently in inventory?”

The next logical question is, “What is a good number for Months of Inventory?” or, said another way, “Does this month’s MOI mean that Lake Martin is in a good market or a bad market?” I think those are the wrong questions to ask. Not “wrong” morally, just wrong in that they are indistinct.  Better questions to ask are, “is Lake Martin’s MOI trending towards a buyer’s market or seller’s market?” Good and bad have nothing to do with it. Low months of inventory is good for sellers, but bad for buyers. Buyers, therefore, might root for a high MOI and perceive it as good.

If we look at 2019, and average the sales by dividing by the eleven months of the year and dividing that into the inventory, we find that there are about 18 months of inventory for lot sales. Last year, 2018 saw about 22 Months of Inventory of waterfront lots.  My conclusion is that, while the raw numbers of waterfront lot sales were not that strong for Lake Martin in 2019, they do seem to be trending towards more of a seller’s market.

Similarly, it looks like home sales are trending lower, indicating that they are leaning even more towards a seller’s market. November 2019 posted almost seven months of inventory in home sales, Compared to the nine months of inventory in November of 2018.

Good or bad market? That judgement depends if you’re a buyer or seller. Sellers seem to still have the upper hand in waterfront home sales while buyers still have an opportunity to enjoy equally footing in lot sales.

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John Coley is a full-time real estate agent specializing in waterfront property on Lake Martin, Alabama. He is the Broker and Owner of Lake Martin Voice Realty and has a website called Lake Martin Voice where he blogs about Lake Martin real estate and area information. This article originally appeared on Lake Martin Voice.

Copyright Information:

All analysis, charts, and statistics in this article are the property of John Coley, Broker, Lake Martin Voice Realty, 8424 Kowaliga Road, Suite A, Eclectic, AL, 36024. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to John Coley and with appropriate and specific direction to the original content.

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