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Declining Market?

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William K

Senior Member
Joined
Sep 21, 2007
Professional Status
Certified Residential Appraiser
State
Illinois
Here is my scenario.

The subjects market shows that the Average sales price and the Median Sales price has dropped from the same time period 1yr ago. (2006-2007 higher than 2007-2008 as well as an increase in Marketing times and more listings than sales)

There are a handful of sales within the 2007-2008 time frame that are resales in the same time frame.

Some of these resales (comparables) have had updates since their prior sales others not so clear they did.

The updates have brought them up to the subjects condition.

My contention is that General Market conditions for the subjects neighborhood show a slowdown / decline.

However since Comparable properties to the subject do not at present show a definitive decline a time adjustment is not supported at this time.

Does this make sense?
 

Pdexter

Sophomore Member
Joined
Oct 23, 2007
Professional Status
Appraiser Trainee
State
Oregon
Your comps can behave differently than the general market. You need to figure out which info is more impotant to your client. Graph it all in xcell and let them choose.
 

EVAUSA

Junior Member
Joined
Jan 26, 2008
Professional Status
Certified Residential Appraiser
State
California
So, historically the market area has shown evidence of decline over the past 12 months. However, since this data is not property specific, but reflects the market as a whole, you looked to find some "comparable" evidence to calculate decline of the subject and didn't find any conclusive data to prove a time adjustment for the subject property...so far so good?

How recent are your comps? Have you compared comparable sales from one month ago to comps four months ago? Are they the same? How about listings, are they priced lower?

If you have good sales data, which it sound like you do, you should be able to prove stability or decline for the subject. Even if the market, as a whole is in decline, the subject's market can be stable. I would still mark decline on page one, and spell it out with evidence as to why no time adjustments were applied (same as I would if time adjustments were applied).
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
Same house sales can be tricky. Rarely are they the same house the second time around. Tightly control for your market and look at year to date over year to date data. What about listings and pendings? If they are priced lower, then...
 

William K

Senior Member
Joined
Sep 21, 2007
Professional Status
Certified Residential Appraiser
State
Illinois
Listings and Pendings right now are all over the board ( some a little lower some a little higher) with little rhyme or reason.

My take is the indicators of Comparable properties to the subject ( resales) outweigh the "GENERAL Neighborhood" declining Average and Median sales prices when it comes to whether or not a time adjustment is warranted.
 

Joyce Potts

Elite Member
Supporting Member
Joined
Feb 6, 2005
Professional Status
Certified Residential Appraiser
State
Florida
Listings and Pendings right now are all over the board ( some a little lower some a little higher) with little rhyme or reason.

My take is the indicators of Comparable properties to the subject ( resales) outweigh the "GENERAL Neighborhood" declining Average and Median sales prices when it comes to whether or not a time adjustment is warranted.

What use are the higher listings when you have much lower listings that still aren't selling? You're going to rely on MLS data that is based on data that is months old to determine whether your market is declining? Why not look to see what truly comparable properties are still sitting on the market, their days on market and how many price reductions they had?
 

William K

Senior Member
Joined
Sep 21, 2007
Professional Status
Certified Residential Appraiser
State
Illinois
The higher priced listings are typically good condition and modernization properties like the subject ( I say typically because there are some that are not good condition because as we know "My home is better than that" always exists) and the lower priced properties are in lesser condition and modernization. ( all are similar ranch style homes with basements just like the subject). Looks like 2 sets of buyers 1 is looking for value the other paying for good condition and modernization. The value looking buyer takes longer or is not as prevalent, while the Good condition buyer buys properties quicker.

Limited to no price reductions on the good condition properties ( both listings and sales) and they tend to sell on average quicker.
 

Kevin Keck

Junior Member
Joined
Jun 2, 2006
Professional Status
Certified Residential Appraiser
State
Ohio
Listings and Pendings right now are all over the board ( some a little lower some a little higher) with little rhyme or reason.

My take is the indicators of Comparable properties to the subject ( resales) outweigh the "GENERAL Neighborhood" declining Average and Median sales prices when it comes to whether or not a time adjustment is warranted.

In a declining market I am finding that listings and pendings are sometimes not the greatest indicators as many sellers are upside down, sideways, and generally confused. I base my market condition adjustments on the percentage change in average or median sale price or the percentage change in sale price per square foot for the entire neighborhood. I generally am not smart enough and don't have enough data to determine the market condition for individual segments. Maybe your best course of action is to just give greatest weight to your most recent sale and/or sales.

Your theory regarding two sets of buyers does ring true in my opinion. In the case of oversupply, buyers have the luxury of only buying homes that are in very good condition. Other buyers, primarily investors, are able to buy properties that need some work for rock bottom prices. Pity the seller that has a home in average condition.
 

Riick

Elite Member
Joined
Aug 14, 2007
Professional Status
Certified Residential Appraiser
State
Delaware
Do yourself a favor and check those sales to see how long they were on the market-- for real.

In one recent appraisal I said:
"MLS shows average marketing time of well under 90 days, but numerous properties have been re-listed several times to artificially reduce average Days On Market."
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
Here is my scenario.

The subjects market shows that the Average sales price and the Median Sales price has dropped from the same time period 1yr ago. (2006-2007 higher than 2007-2008 as well as an increase in Marketing times and more listings than sales)

There are a handful of sales within the 2007-2008 time frame that are resales in the same time frame.

Some of these resales (comparables) have had updates since their prior sales others not so clear they did.

The updates have brought them up to the subjects condition.

My contention is that General Market conditions for the subjects neighborhood show a slowdown / decline.

However since Comparable properties to the subject do not at present show a definitive decline a time adjustment is not supported at this time.

Does this make sense?
The general market as defined by the median and average selling price may reflect a change in the mix of housing and not necessarily reflect specifically what your subject value is doing.

If you pull out the homes from the general market over time that are truly comparable to your subject, that is going to reflect market conditions for your subject over time.
 
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