Anybody ready to check "DECLINING"?

[Richard Carlsen]

Just one cautionary note on the data that we see quoted in the newspapers.

I read in one paper that the average price of a house had dropped $9000 this year over the past year. Our own MLS numbers show a decline in the average price of a house over last year.

However, looking at the numbers very closely we see that what is reflected in these "average prices" is not a decline in value but a shift in the buying market. The high priced houses are not selling in the numbers that they were while the lower priced buyers are getting more active. In other words, it was not a loss of value but a shift in the buying activity of a sector of the market.

The key is to make sure that the fact that there might be a declining average price of houses is not assumed to be a decrease in property value. The general public may not always know the difference. We as appraisers need to be very much aware of the differences and not allow ourselves to get caught up in either the soaring or the declining selling price frenzy. It seems to me that this is precisely the reason for USPAP. Adherence to procedure is required so we appraisers will have a solid basis for our opinions that is unaffected by the gyrations of the market or the whims of our clients.

 

[Pamela Crowley (Florida)]

You are very correct Richard. I never used the 'average' for the incline and I'm not about to use that 'average' for the decline either. Sub-markets tell the real story for that particular section of the market and can be as individualized as a specific subdivision.

What I'm seeing is that the justified appraised value would have been higher 4-6 months ago and the decline in the asking prices is growing - at least in the mid-range priced markets. The vacant building site sales have declined rapidly during these past 3 months in this same market.

 

[Richard Carlsen]

Good Morning Pam

In a low density market, a decline in value one of the hardest things to prove. A rising market can be judged by the value trends but declining has such a dramatic effect on lending that one has to be very careful not to just throw the term around. Lenders get awfully nervous when they see declining values (and rightly so) Making that call has more consequences in the lending determination than saying level or rising so we do have to be careful.

In the case of mfg houses, up here there is sufficient documented evidence from a fairly homogeneous quality/construction that comparisons yield some fairly hard data. Also the variables (garages, pole buildings, etc.) are usually minimal when compared to site built houses.

 

[xm72mhd]

You are very correct Richard. I never used the 'average' for the incline and I'm not about to use that 'average' for the decline either. Sub-markets tell the real story for that particular section of the market and can be as individualized as a specific subdivision.

So do you use any averaging after identifying the sub market? Or don't use the "A" word if you can't for some reason. After you group the sales into some sort of similarity, do you report the result from the group or just report it as individuals?

I've found I have to or I end up with nothing ore than what I started with.

Tawfik started me on this trek and we discovered the same thing. Not every area or price range acts the same.

 

[Couch Potato]

I would agree that things seem to have turned downward over in Palm Bay and investors bailing out on contracts is a strong probability. The report I mentioned earlier in the thread was a new construction sale. The builder had 10 nearly finished houses with for sale signs out front. The way the market was when construction was started on those houses, they undoubtedly had contracts.

The nature of the Palm Bay market makes it easier to spot trends than many areas. Plenty of sales activity of existing houses, new construction and residential lots with most of the town being very similar in size and style of construction. If you asked me to guess the size of the lot of a house in Palm Bay ±1%, I would guess the dimensions are 80 x 125 for an area 10,000 SF and I would be right more than 90% of the time.

 

[moh malekpour]

Not yet. Up to few month ago, I used to check "increase" but since then I have changed it to stable. I am checking the market month over month. There has been a decline in sale but not much in price. The decline has been in Jan and Feb. March is going to be the real test. If there is a decline in March, I am going to declare decline otherwise, I am going to stick with stable.