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Decling Market Y/N

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it seems slightly declining, but imo, to get a true picture the appraiser has to go beyond last years statistics (esp if statistics are not dramatic enough to clearly point to the direction.) although in this case, a number of things within the statistics support the decline..48 previous years sales, vs 29 most recent year, median sales price went down around 10 percent...the deal breaker for me many times is to look at the current lisitngs, partic of homes very similat to the subject. how many listings are there, in rough proportion to the subdivision? how many days on the market? how many price reductions? are any in contract, and if so, which ones? only the cheap ones? the very nice ones? are there starting to be short sales and bank foreclosures among the listings? if the most recent sale, for example, of a home like the subject was for 150 k two months ago, and now, there are 3 listed very similar to subject, two have reduced prices below 150 k, and the third listing with a high price has been on the market 250 days so it doesn't count...that would tell me the market is still declining. there is a point where that is the appraisers's judgement, based on current demand and very recent activity in the listings. if you are in a subdivision with aprox 600 homes and 20 are listed and 4 are in contract, and two out of the four are decent price listings, that market may have declined, but may now be stabilizing., But if you are in the subdivsision with 600 homes and 89 are listed and 2 are in contract, and one of the two is a bottom price short sale, that is a low demand, over supply area heading in declining direction still.
 
Here is the data I uncovered. Would this indicate a decling market or stable? There is a drop, but fairly minor. What sayeth the gurus and oracles?

From 07/03/07 to 07/03/08, there were a total of 29 closed sales within the neighborhood boundaries. The average sales price was $169,438, the median was $165,000. The averages days on market was 48, the median, 29. The average GLA was 1,542, the median, 1,500. The average dollar per square foot is $109.88, the median is $110.00. The average list price to sales price percentage was 97.93%.

From 07/03/06 to 07/03/07, there were a total of 48 closed sales within the neighborhood boundaries. The average sales price was $174,253, the median was $166,500. The average days on market was 27, the median, 12. The average GLA was 1,557, the media 1,500. The average dollar per square foot is $11.92, the median is $111.00. The avaerage list price to sales price percentage was 98.78%.

How can you accurately gauge if your market is declining by analyzing one year vs. another year. IMO you have to break down your data into quarters to see where your market is currently trending. What if your market was declining up until 1/01/2008 but now your quarterly data reveals the market has stabilized? Don’t you think this data would be more supportive than year vs. year analysis?
 
Well I am certainly no guru but I'll give you my opinion on it.

Economists typically consider a stable market one that is increasing at the rate of inflation. So an increase of 3 to 10% these days could be considered stable. (How much is inflation scheduled to rise this year?)

A market that is not declining or appreciating (or declining/appreciating so little that it is within the margin of error of your data, as your's would be) is considered a stagnant market. There is no check box for "stagnant" so I usually call a stagnant market stable and explain it as stagnant in my comments.

I like to compare year over year data like you did, and then this quarter over the same quarter from last year, and then show the last quarter compared to the current quarter. Overkill? Probably. Plus, as my market changes how I like to research its data changes too. Like, when there is not enough data, I might show instead of quarter this year over quarter last year data, year to date over year to date data.

But to answer your question, assuming all other readings are similar (which they often are), I'd call the market "stable" and explain that it is actually stagnant in the comments.
 
How can you accurately gauge if your market is declining by analyzing one year vs. another year. IMO you have to break down your data into quarters to see where your market is currently trending

Again, looking at data by quarters over past year will tell you whether your market had DECLINED. how to tell if it is still declining ( forecasting the near future) you have to look at current listings, whether any are in contract, which ones are going to contract, are there price reductions, short sales present etc. I agree, the last few sales may not be enough to tell exactly where the market is, so one has to look at the listings to get a feeling for where the market is going. the number of listings relative to number of homes in subdivision and number of listings going to contract relative to number of lisitngs still active, days on market etc gives you the picture of where market is going.
 
I finished this one and sent it in as declining, though I was waffling on that decision. It seems that there are no real guidelines, so it is up to me to prove my opinion. I think I pulled enough data to adequately prove my point. I guess I will wait for the howling to start.

The overall MLS is up 05/08 versus 05/07, but it is mainly due to more over $1 million closings than usual. I think there were 7 instead of the usual 1-2.

I have seen some nebulous instructions from customers regarding declining markets. Basically it says to prove it and include all your data. I wonder if they want the raw data or just my summary of the results.

I don't really encounter many declining market situations, and when I do they are often blatant. For example the Rancho Viejo area in Santa Fe has dropped as much as 35% in the past year. I found model matches that indicated huge drops. I got lucky and got three in a row that were the exact same floorplan. All within a couple of weeks. Two were close enough to use the same comps.

PITA subdivision because none of the streets arre on any maps. I can download a PDF map from their website but I need a microscope to read it.
 
Economists typically consider a stable market one that is increasing at the rate of inflation. So an increase of 3 to 10% these days could be considered stable. (How much is inflation scheduled to rise this year?)

Our analysis of a declining market is different from an economist, and of course there are no guidelines and no across the board formula...when there is, they won't need us anymore. There are so many statistics and computer regression analysis programs out there. The reason we are called in is to provide human understanding of the complex data, the whole feeling for the market, where the listings are going, what the recent sales mean, etc. When appraisers rely totally on formulas and computer data they nullify the contribution of their own involvement, making it easier and eaiser to get rid of us ( if it is all about forumlas or copying what the economists say, who does indeed need us? We provide the context, the day in day out hands on understanding of the market, supposed to be talking to realtors, looking at pending listings, interpreting what is going on)
 
That is nice but what happens when challenged? For example, Albuquerque is on no list for being a declining market. If I cannot trot out reams of empirical data and point to guidelines, then how do I prove my point? I cannot just smile and say trust me?
 
of course you include data, and listings along with historical sales are data, the point I was trying to make is it is the appraiser's judgement about which data to include, which data to trust, which trends the neighborhood is following in and why,...and that is judgement based on experience, not formula, though some formulas can be derived from data and used to support adjustments. if you include a pending listing priced below the last sale, that is data that clearly points to a declining market. if you include data with declines over the past year, etc.
 
Economists typically consider a stable market one that is increasing at the rate of inflation. So an increase of 3 to 10% these days could be considered stable. (How much is inflation scheduled to rise this year?)

Our analysis of a declining market is different from an economist, and of course there are no guidelines and no across the board formula...when there is, they won't need us anymore. There are so many statistics and computer regression analysis programs out there. The reason we are called in is to provide human understanding of the complex data, the whole feeling for the market, where the listings are going, what the recent sales mean, etc. When appraisers rely totally on formulas and computer data they nullify the contribution of their own involvement, making it easier and eaiser to get rid of us ( if it is all about forumlas or copying what the economists say, who does indeed need us? We provide the context, the day in day out hands on understanding of the market, supposed to be talking to realtors, looking at pending listings, interpreting what is going on)

I don't disagree. I look at listings and pendings and show the projected average price of each, should the LP:SP ratio be stable, to give an indication of market direction in the coming months. When we check the box Stable the alternatives of verbs are in the present tense, i.e., increasing/declining, and not past tense, so I believe looking ahead is very important.

But a house that was worth $100,000 a year ago that is worth $105,000 now, when today's $105,000 is worth only $94,500 of last year's dollar has not been an appreciating investment. We are not reporting on "Property Prices" but on "Property Values". Yes, property pricing is increasing, the value of that particular property is at best stable and arguably decreasing.

Imagine for instance we we had to appraise in the most stable monetary unit during any given period, as measured against the value of gold. In today's market that would be the Euro. The $100,000 house a year ago would have been worth E73,530 at that time. Now at $105,000 its stable currency value is E66,845. While one shows an "appreciating market", the other, controlling other variables to reflect an otherwise stable envirnoment, obviously shows a declining value.

I don't suggest this is to be done in a report and reported on accordingly. But it points to the importance of considering inflation in overall stability reading. This is especially true in some of my markets where Canadian, Mexican and European buyers can be a significant part of the market segment.
 
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