Do you have a camera in your car that cuts on when in reverse? If so, how big is the display screen? Is it tiny and located up on your rear view mirror? Or is it a huge display on your dash?
If it is one of those huge LCD displays on your dash – be honest – do you still use your side mirrors? I hope so! When you’re driving in reverse, it can be dangerous to look at it only one way.
In real estate, we spend a lot of time looking backward in our attempts to predict the future. Since it is January now, it is a natural time to consider the likely direction of real estate prices here at Lake Martin. Lake Martin is located in rural Alabama, and since our real estate market is so small, I think looking at sales prices once a month can be very deceptive. A few large sales can throw off the whole average.
I came into this exercise thinking that Lake Martin waterfront home and lot prices did not move at all in 2023. I based this on my observations as a “boots on the ground” real estate agent. Lake Martin is my only area of emphasis for my business. I don’t try and play in all sorts of markets here in Alabama, so my focus is an inch wide and a mile (ok, 491 feet) deep here at Lake Martin. Therefore, I trust my field observations. But will the real estate sales results tell the same story?
I added up all of the dollar values to see what the numbers would tell us. I checked the Lake Martin Area Association of Realtors’ MLS and found that in 2022, through 11 months ended November 30, 2022, 269 waterfront homes were sold on Lake Martin at a total value of about $291. If we compare that to 2023, through November 30, 236 homes were sold at a little over $275 million. Averaged out, we see that the average price actually increased in 2023 by almost 8%.
So what gives? Does this mean that the value of all waterfront homes have increased an average of about 8% in 2023? It doesn’t feel that way. In fact, and it, I can think of five or six houses that are for sale or were for sale in 2023 that also sold in 2022. If home prices have increased 8%, wouldn’t those individual homes have sold for more than they did one year ago? In fact, none of them did. Common sense would see that and say that prices have not gone up.
But here is a contra indicator that is hard to ignore – average price of homes sold increased 8% in 2023. I decided to look a little bit behind the numbers. When I did that, I found a very interesting angle. I looked at the top sales in 2023 and found that many of them were pretty huge. In fact, I was surprised to learn that of the top five sales that we have ever had on Lake Martin, four of them happened in 2023.
But, am I just cherry picking a statistic that proves my point and ignores other evidence? Am I just looking at a few examples and anecdotally drawing conclusions? I dug deeper to find out. I added up all of the dollar values to see what the numbers would tell us. I checked the Lake Martin Area Association of Realtors’ MLS and found that in 2022, through 11 months ended November 30, 2022, 269 waterfront homes were sold on Lake Martin at a total value of about $291. If we compare that to 2023, through November 30, 236 homes were sold at a little over $275 million. Averaged out, we see that the average price actually increased in 2023 by almost 8%.
So what gives? Does this mean that the value of all waterfront homes have increased an average of about 8% in 2023? It doesn’t feel that way. In fact, and it, I can think of five or six houses that are for sale or were for sale in 2023 that also sold in 2022. If home prices have increased 8%, wouldn’t those individual homes have sold for more than they did one year ago? In fact, none of them did. Common sense would see that and say that prices have not gone up.
2023 Had Lots of Large Home Sales on Lake Martin
I added up the top five sales in 2023 and found out that they make up almost $26 million. The top five sales in 2022 totaled about $19.8 million. It gets very revealing when you compare that number to the whole for each year. That simple bit of math shows that 2023’s top five sales are actually 38% higher in proportion than the previous year.
That means that the top sales in 2023 exerted a much greater influence on the average than did its predecessor. Said another way, we had a lot of mega sales in 2023 that are skewing the average up. Said yet another way, sales were top-heavy in 2023.
All these numbers and percents are just a long way to say that a few huge sales have, in my opinion, skewed the 2023 average up. Looking only at the increase in average sales price gives us a false sense of the direction of the market for waterfront homes. It makes a little bit better sense when you put it in context of the market as a whole. Every time we look at real estate results, we must pay attention to the meat and potatoes of the business – numbers of homes sold and inventory.
Will the “basics” of the business tell a different story? Nope.
Is Lake Martin Still A Sellers’ Market Right Now? We have seen in these pages earlier this year that the numbers of waterfront homes sold on Lake Martin were down about 12% when compared to 2022. Furthermore, the numbers of homes sold have been going down for three straight years. But isn’t that because there aren’t as many homes for sale? Not necessarily. Inventory, while still below five year averages, steadily increased in 2023 when compared to similar months in 2022.
Classic supply and demand economics tells me that the Lake Martin market, in my opinion, is no longer in a sellers market. This coincides with what I am seeing every day as an agent. Sure, there are still houses here and there that get multiple offers. But by and large, we are seeing longer days on market, sellers taking less than list price, and seller concessions such as repair allowances, etc.
Predictions for 2024 Lake Martin Real Estate
How can we use these results to look ahead to 2024? Personally, I will continue to watch the basics – homes sold and inventory. I think inventory will continue to rise in 2024, but I don’t think it will be all that drastic. It would take a lot to get to our five year average, and I don’t see that happening, although we will be closer to it in December 2024 that we were in 2023. I think sales will be about the same, leading to a slight downward pressure on prices. But, I reserve my right to change my mind when the monthly results start coming in for 2024.
