Decling Market Y/N

[tyfsu]

I've attached an article by David Phillips SRA titled "Appraising in a Declining Market" and I use some of his methodologies to justify what is a declining market and what maybe stable. Good read and hope I'm not creating any forum violations for posting this article.

 

[PropertyEconomics]

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.

You sent it in as declining based upon a 1% change downward?

 

[CBBoston]

Some one said we don't look at things the same way as economists. Well we should be. Apprasial is nothing but applied economics. If you have enough data, you can determine if a trend is present. Its not rocket science but still is beyond the skills of the average residential appraiser. A single year over year decline (increase) of 1% most likely doesn't indicate a trend. It depends on the variance over several years to determine that.

The idea that if home prices are not increasing at the rate of inflation are actually declining, is valid. If you you have a $1 today and stick it in your pocket for a year when inflation is 10%, you will only be able to buy 90 cents worth of goods. So if you buy a home today for $100k and sell it in a year for $100k, its really like only getting $90k worth of buying power assuming no transaction costs. Also keep in mind there are several different measure of "inflation." The one you often hear quoted doesn't include energy and food costs. Like none of us drive or eat. Another thing not mentioned is the the basket of goods assumes substitution. So if you can afford and steak this year and the cost of beef increases, the assumption is you can still eat hamburger. Your cost of living (or surviving) has not increased and therfore no inflation has taken place.