The Fallacy of Price Per Square Foot and a Highway 280 – Chelsea Real Estate Update

A Radio Show and a Highway 280 – Chelsea Market Update

Highway 280 and Chelsea Update and Price Per Square FootI recently had the opportunity to be on Genny Williams’ radio show “Life Along 280 & Chelsea: Discussing Your Property Values!” on Kool 96.9. This show is focused on real estate along the Highway 280 Corridor, which includes the Chelsea area.

Being a long time Birmingham home appraiser, Genny asked if I would discuss what I’ve been seeing in local real estate trends for this growing area. Shelby County is one of the fastest growing areas in the state of Alabama and the real estate market along Highway 280 contributes a lot to that.

Questions About Price Per Square Foot

Before I get to the Highway 280 market update I wanted to touch on a topic that I got a couple of questions about this week. We talked a little about price per square foot on the radio show and I also had several people ask me about it throughout the week.

Price per square foot continues to be most people’s key metric when discussing property values. While it can give you one value indication it should not be the only thing you look at.

I will start off by giving you the perfect scenario to use this value indicator. If your home is in a neighborhood where all of the homes are very similar with only slight variations in living area, price per square foot can be more reliable.

Homes within these types of neighborhood usually do not have basements and only have one story. A reason that price per square foot is more accurate in areas like these is because of the high conformity with little variations in features.

If you try to use price per square foot in neighborhoods that have a wide range in the living area, and big variations in amenities, you run the risk of using a home sale that has a lot more features included in that price per square, which may not be reflective of your property.

If you want to look at price per square foot, and your home is not in a neighborhood like I described above, you will need to make sure you don’t place all of the emphasis on price per square foot alone. I’ll give you a couple of tips to follow.

The first tip is to make sure you bracket your property, choosing sales that are no more than 25% larger and smaller than your home. In addition, try to also use a home very similar in size.

Don’t use sales that have a feature known to move the needle on value if yours doesn’t also have that feature. Don’t use a comparable with a pool if yours does not have one. In addition don’t use comps with basements, including finished and unfinished, if your property does not have this feature.

If your immediate subdivision does not have recent sales that match these criteria it is okay to go to another neighborhood if it is one that a buyer for your home would also look at. Distance is not always the most important factor when choosing sales but the comparables should be in a similarly competitive market area.

I hope this discussion of price per square foot has been helpful. If you have any other questions feel free to contact me. Now on to the market update.

Highway 280 and Chelsea Market Update

Neighborhoods within the Highway 280 and Chelsea area have traditionally done very well in property appreciation. This area’s location is convenient with respect to shopping, schools, and employment centers.

Several years ago the Grandview Medical Center was built along Highway 280 near Interstate 459 and this has had a positive impact for buyers moving to the area. In addition St. Vincents and Brookwood Baptist Medical Center have facilities in the area.

Over the past 5 years, the median sale price of homes within this area has been approximately 4% higher than Shelby County as a whole. This trend chart shows what this looks like.

Shelby County vs Chelsea Median Sold Price

In the past 12 months, five subdivisions were in the top 10 for the number of homes sold. These neighborhoods are:

1. Chelsea Park
4. Highland Lakes
5. Polo Crossings
6. Forest Lakes
10. Greystone

As you might expect the trend in housing supply for this area has followed that of most other areas around Birmingham and the nation in general. Inventory levels have slowly declined, which has helped sellers get more for their homes.

At the time of this writing, there is approximately 4-6 months worth of inventory which is considered a balanced market. Here’s a look at Shelby County vs. Chelsea:

Shelby County vs Chelsea Months of Housing Supply

This area is very diverse in the price of homes you can buy, however, the majority of recent sales fall within the range of $250,000 to $500,000.

North Shelby County and Highway 280 Sales by Price Range

Conclusion

I hope the information about price per square foot was helpful as well as the real estate sales statistics. If you have any appraisal related questions feel free to contact me and as always thanks for reading.

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Comments

  1. Nice job Tom. Love those graphs.

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