• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Defining Over supply

Status
Not open for further replies.

JSmith43

Thread Starter
Elite Member
Joined
May 5, 2003
Professional Status
Certified General Appraiser
State
California
Say there were 5 very similar 2 story homes in a pocket development that sold in 2007 and there are currently 5 listings that are very similar. Assume the 5 homes that sold in the prior 12 months sold in an average DOM of 71. The pocket development has several nearby competing residential developments that are reasonable substitutes

Would you check the over supply box on a 1004? The Over Supply box is checked, but the market check box selection is Stable.

I must have missed the memo. Does anyone out there have a definition for Over Supply? Someone with a search able copy of Fannie or Freddie guidelines?

I might even default to a textbook, but I'd rather take th room temperature. What is the current standard that practicing appraisers use to make that decision? I bet some appraisers in FL and CA have thought this out:)

Thanks in advance.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
If you look closely at the left hand side of the URAR 1004 form, you will see that this data is under the "Neighborhood" heading. In my way of thinking that means that the One Unit Housing Trends of value, supply and marketing time apply to the Neighborhood as you have defined it.

All too often when doing reviews, I see the author (a Cert/Res in the last case) define the neighborhood as the township. Hope they send that boy back for a refresher course.

In the case of a low density market or a neighborhood without any sales or so limited a number of sales as to not be able to draw conclusions, I typically step the area up for analysis and clearly state that in my market conditions. For instance, in an appraisal just finished, the house was rural, near a lake in a small 42 lot plat with shared ownership of a lake front lot for access. There were no sales in the neighborhood in the past year. I therefore, expanded the area for analysis up to include the same section which gave me a sufficient number of sales of houses of the same size, age and utility so that I was able to draw a valid conclusion as to value, supply, and marketing time. In some cases of very low density, it has been necessary to go up to the township level to get a sense of the market but I certainly do not call the township the neighborhood.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Rog-

I agree with Richard that the "oversupply" indicator is intended to reflect the neighborhood (not 5-similar comps).

IMO, the 5-sold, 5-listed, 70-day avg. marketing time for the 5-similar homes tells me nothing as far as over/under-supply for the neighborhood.
 

David Dietz

Member
Joined
Oct 30, 2006
Professional Status
Certified Residential Appraiser
State
Florida
Ditto with these guys. It is the neighborhood not the comparables that is being referred to on the front page.

As for the over supply definition it is as it reads not written explanation needed IMO. However a one year supply in one market could be typical when in another it could reflect an over supply. It all depends on the market area and it does vary.
 
Last edited:

Mark to market

Junior Member
Joined
Nov 14, 2004
Professional Status
Certified Residential Appraiser
State
New Mexico
Per FHA,
Property values
Mark the box describing the current trend in property values for One-Unit single family homes in the community. Comparing houses that have been sold and resold in recent years is an effective way to determine market trends. Appraisers who use this method, however, should make sure to factor in any improvements or changes made to the property between sales
Demand/Supply
Mark the appropriate demand/supply trend. To determine the equilibrium status of supply and demand in the neighborhood, compare the number of houses sold to the number of houses listed for sale in a recent time period. The similarity or difference between the number of houses sold and listed, not the absolute numbers, should determine the demand/supply level.

Textbooks often suggest that when establishing demand/supply we compare the current # of months of inventory with past inventories. To find current # of month of inventory take current active listings and divide by closed sales per month.

Bottom line is that it is possible to have periods when values are stable and there is an over supply.
 

JSmith43

Thread Starter
Elite Member
Joined
May 5, 2003
Professional Status
Certified General Appraiser
State
California
Bottom line is that it is possible to have periods when values are stable and there is an over supply.

If values remain relatively stable and marketing times remain fairly reasonable, say, 120 days or so, where is the evidence that it is an over supply? How does it manifest itself, if not by unreasonable marketing times and plunging prices?

The supply may be a larger number than some relative time period, but, I believe the term over supply should be used to describe situations of over building or shrinking demand that lead to significant price declines and/or extended marketing times.

That's what I believe, but I am interested in the views of any appraiser that chimes in, especially if they are checking the Over Supply box on the 1004. What are the conditions that you are summarizing with that check mark?

Thanks!
 

Charley Horse

Junior Member
Joined
Aug 28, 2004
Professional Status
Certified Residential Appraiser
State
Michigan
I've checked oversupply w/stagnating (stable) values...

http://appraisersforum.com/showthread.php?t=130893 (see post #5)

... but then some opined one cannot have an oversupply market and not have decreasing prices.... which I don't necessarily agree with unless median prices and/or sequential sales of the same properties indicate declining prices (values).
 
Joined
Nov 7, 2005
Professional Status
Certified Residential Appraiser
State
Florida
Per FHA,
Property values
Mark the box describing the current trend in property values for One-Unit single family homes in the community.
Demand/Supply
Mark the appropriate demand/supply trend. To determine the equilibrium status of supply and demand in the neighborhood, compare the number of houses sold to the number of houses listed for sale in a recent time period. The similarity or difference between the number of houses sold and listed, not the absolute numbers, should determine the demand/supply level.


.

absorption rate plus value trends 1/4 over 1/4 for the neighborhood as measured by cdom, sp/sqft and low, high & avg sales price
 

Kevin Keck

Junior Member
Joined
Jun 2, 2006
Professional Status
Certified Residential Appraiser
State
Ohio
I think you can have oversupply with no declining values but you can't have declining values and not an oversupply. In some reports I have indicated a stable market but have stated that if current inventories were maintained declining values will likely result. There is no magic inventory number that indicates an oversupply of listings. In my opinion, declining values are the best indicators of an oversupply of listings. All other indicators of oversupply are just guess work.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
The relationship between supply and price-trend doesn't always (I would argue almost never) result in a fixed-ratio correlation. It doesn't move together like a well-drilled marching band, but more like a slinky, with prices movements accelerating and decelerating at different rates than the changes in inventory.

Having said that, rising inventories and stable prices is an unstable (and unsustainable) environment IMNSHO. :new_smile-l:
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks