At what point do you call the mkt declining?

[Ron in AR]

You know as soon as you indicate a declining market on your report, it's over. I would assume no one throws the "D" word around loosely.

At what point would YOU say a market is declining? Of course, when property values are going down but when would you start measuring the decline?

Does this question make any sense?

I see signs in our market that would indicate that a decline is on the way. A mass exodus from our town, property appraising for more than the sales price when using comps 6-12 months old, appraisals coming in less than they did the last time you appraised the home (though it still is not below the sales price a few years back), huge increase in stagnant listings, etc.

I know none of these "signs" is hard documentation of a declining market but even if you were to try to measure the direction of a market (stable is so much easier, right?) you're obviously observing trends from a point in the past to the present. But what point in the past would you use? I know someone is going to say from the point at which they started declining...

How much evidence would it take for you to determine that a market is in a decline and actually note that on the report?

Ron in AR

 

[Ross (CO)]

If you have supportive database functions within your MLS records I would look at average selling prices in your defined neighborhood over successive time blocks, be they 3-month or 6-month, but see what that reveals. I do this when needed for all property types in the area, and then for that type which is just like the subject, ie. 2-story. You might also be diligent to look at the listing history of the addresses you select for your comps, and NOT just that last individual listing that became the recent sale. When you see several prior listings reasonably linked or even overlapping in time you may get a clear understanding of just how this property was perceived by the buying public during its term of exposure. I just checked the dreaded "D" box on a report last week for a place in a small mountain town and had all those other points of data to offer. Listings at $80K, becoming 70K, becoming 60K, becoming 55K and then selling for cash at 40K --- sure does tell you what the public feels about that market ! It is what it is.

 

[wyecoyote]

I've had to check the "d" box in some areas around here that were hard hit by the tech decline. Houses two years sold and appraised today at less than original purchase price. These are the higher end homes $400K+ houses. This was supported not only by the recent sales but by the listings on the market. Other lower end houses appear to be stable $100K-mid $300K houses. But it appears that this is a segment in the market and really effected by the Tech decline.

I really hate to be the bearer of bad news and as soon as I sent the report off the phone started going off the hook but what can you do other than state the market condition,

 

[Dee Dee]

At what point would YOU say a market is declining? Of course, when property values are going down but when would you start measuring the decline?
Ron in AR

I would say that the market was declining at about the same time that I'd be looking for job options outside of appraising. 8O And I suspect that is a good possibility by next fall for myself and many others in the Denver area.

Several of us have noticed the same phenomena as Ryan, a stagnation or even decline in the upper end housing market but continued sales and stability in the lower price ranges. Quite a contrast to what was happening here just a couple of years ago, before the tech industry was turned upside down.
With very few exceptions nearly every family I know personally has at least one of the breadwinners either laid off, scraping for work if they're self-employed or there is the constant cloud of uncertainty if they'll be caught in the next wave of employee cutbacks. Just about every mortgage lender, realtor and appraiser that I know is singing the blues right now. At this point most of us are still trying to figure out how bad it's going to get, if we can financially hold out long enough, and if there is any light at the end of the tunnel. We've all tried to resist being pessimistic, but conversations are getting more and more gloomy. It's a tough pill to swallow when only a short time ago there was more work than anyone could keep up with.

 

[Elliott]

Its kind of like the way I think of USPAP, great set of standards
but it has no intelligence behind it. I guess truth is a very
precious commodity, so should be used sparingly. Have
you ever written 'fair' on a report?? Wow, that can cause
all kinds of problems, lots of phone calls, letters of explanation,
accusation of 'being unreasonable', realtor threats of never
using 'you' again. So I really couldn't consider using such
a powerful word as 'declining.' I think that would be a
real career ender.

Actually thinking about it....I think appraiser's are paid for
giving a number, a number that just happens to incorporates
everything.

elliott

 

[Caterina Platt]

I have one of these markets in my area. It entails sales prices 20-50% less of past values. It also entails a high vacancy ratio - figure 15% -60%or so. Look for any boarded up REO's (they only do that in areas they are concerned about the windows, mind you) Nasty market, eh? Don't be afraid guys! We have to be honest in these cases. Tell the REO companny the truth!

 

[Bemis Pownall]

Dee Dee
get a grip man!
Its not that bad here.
Our May was 2nd best for the year and June is right in there.
Ok so you have to take those far away jobs now, but the world hasnt stopped spinning.
get out and market! get broadband, do reviews! but switch professions! NEVER!

That is all

how bout those fires in smoky colorado?

 

[jtrotta]

Ron

Yours- "I see signs in our market that would indicate that a decline is on the way" Your understanding is a perception of whats to come, but it hasn't happened as yet. A Decliniing Market - is a little tough to decifer, because you'll always get some, maybe a group of housing that keeps on selling at typical price's. I do not believe you want to define it in the very beginning of a slide, it needs momentum to determine if it's really at that point. Very tricky positioning, as it also needs support and if you get reviewed - your going to need to be able to support YOUR position fully and bveyond doubt, or you will loose.

8)

 

[Restrain]

The key to a declining market vs. a 'minor correction' is in the trends. If you have an outwards migration and an increasing listing inventory vs. a declining sales activity, you have a strong case for a declining market. There has to be a demand, and with a migration away from the town, you are losing the potential buyers. Conversely, you may have a correction in the market where there are layoffs (tech sector, etc) but the community is still generating jobs and people are moving in, so that although you may have despiration sales (can't make payments, etc), this will be a short-term trend and is probably not reflective of the total market. I would watch more than just the sales prices. Watch the local unemployment figures, watch the number of vacant homes on the market, not just homes on the market. Watch the sales tax quarterly returns. The slower the economy in the area, the more probable a declining market. Remember, just as a rising tide raises all ships, a sinking tide can beach them just as easy.