A buyer could expect about 8 good choices available for less than $1.5M this year. Yes, obviously there will be many more homes than that come to market. But let’s step through how I would use that statistic to help a buyer shape their home search for three-bedroom homes in Cambridge.
The client starts with these questions. Where will I find the home that I need, and what will it cost?
Some buyers will be eager to purchase a single family home, but Cambridge has far more condos than single family homes. Of those condos, historically, most of them were on the smaller side. In the past few years, and even more during and after the Covid years, unit size is growing and there are more “large” units than ever before. More three bedroom and larger units sell each year in Cambridge. More buyers are also looking for those larger units to be close to work and school, which makes the larger homes still feel elusive.
What will a home cost? What are the median prices for homes in Cambridge?
While median prices are the most accessible data that are available to both buyers and sellers, we don’t believe that “most accessible” means most helpful. We explain to our clients that median prices are an economic indicator and give the media a way to discuss the real estate market in a few seconds on broadcasts and in headlines. But median prices do not provide any guidance to a buyer or seller about the market value of a particular property at a particular time.
Context is crucial to arrive at a reasonable expectation of market value.
We find that a buyer will look at about 5-10 properties before they make a buying decision. A seller will generally be familiar with the properties in their immediate neighborhood. A seller may also know of a particular property, often an unusual property that sold for an unusually high price.
Do buyers and sellers “know the market”?
But can this perspective help a client see the state of mind of the buyer that they will either compete against, or the buyer that will purchase the home of the seller? It is hard to believe that buyer can make an informed decision armed with only that information. The troubling part of this process for the buyer, is that the buyer determines the price. What if they paid too much?
Can a buyer see what we see as agents? Or even see more than most agents?
We find that buyers might intimately know a small slice of the market, but not have a clear picture of the whole market.
With what looks like few choices available, some buyers will wait until the unicorn appears that is that “good deal” that is somehow a wonderful unit priced at an unbelievable price.
Looking at the whole market means looking at how many units might come to market before the buyer’s lease expires, or the new job starts, or the patience they (or their partner) have with the search ends.
From the sales for 2023, around 300 “large” homes sold, with a median sale price of $1.74M. That is great conversation for chatting with friends and kvetching about a frustrating home search. That is less helpful for the many clients that are looking for homes for less than $2M, or less than $1.5M, and need to understand how many opportunities they will have and how much they will need to pay.
The expectation would be about 100 homes for less than $1.5M in a year, but these aren’t all going to meet the expectations of the buyers. We can use this chart to discuss frustrations that buyers feel.
Buyers are typically aiming at a very narrow slice of the market. Three bedroom homes up to about $1.1M most often have a portion of the living space in the lower level, or basement of a home. For most buyers, that isn’t a slight change in configuration. That is a non-starter. That portion of the market isn’t a part of the same market to them. Likewise, most of the market for larger units is priced above $1.5M. While most larger units are in that portion of the market, most buyers aren’t seeing them nor realizing that the units they dream about are farther up the curve. What a buyer does see who is looking below $1.5M, and for units that are fully above grade, is about 50 units per year coming to market.
We expect about 1/3 of available homes to meet the needs of a specific buyer.
The rule of thumb that we give our clients when looking at that number is to consider about 1/3 of those options likely to be workable for them. If there are 50 units in a year that fall into that portion of the curve, about 1/3 of them will just be unworkable. Those units won’t actually be above grade, they will have very odd layouts, they might not truly meet the description in MLS. Those aren’t actually 3 *real* bedrooms, for example.
About 1/3 of them just won’t be to the taste or details of the buyer. There is nothing fundamentally wrong with the home, but for the buyer it has too many stairs, needs too many updates, or is not in a workable location for them.
That leaves about 16 homes per year that we expect to meet the needs of the buyer fairly well. That is a small number.
Over the course of the spring season, prices typically rise about 10%. (There are many things that contribute to that number, and we can write about that in another article.) This is part of the pressure that buyers feel. They see dozens of units coming to market, they are disappointed by what is available, they blame their price range. Their expectations of what will be available is often much higher than what they see. Rising prices will reduce the number of houses that fall into their search by even more.
For successful buyers: Use real data and projections to sort out what your options will be and what they will cost.
For successful sellers: To sellers, understand how the buyer will view your home compared to the other homes that have sold, or will be on the market.
If you’re seriously considering selling your home, we’re more than happy to provide you with the data to move you forward. You can fill out the form below, and we can send you the charts, the list of properties that sold in your neighborhood, and we can set an appointment to review the data together.
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A Design Method to help busy professionals make smart moves in Cambridge | Cambridge+
Here are the active listings for homes in Cambridge with 3+ bedrooms. Do you see any property that piques your interest? Or are you looking for something different?
Greater Boston Sales
Stephanie Ford
(617) 765-9641
1261 Centre St, Newton 02459
1000 Mass Ave, Cambridge 02138
