What Constitutes Over Supply & Declining?
eddgillespie said:
As a recovering "stable" check boxer, may I turn to all as a support group. This is going to get more nastier, isn't it?
It is like a nightmare, and suddenly you wake up, only it isn't a dream, it is real. Sales volume has declined, listings are increasing and staying on market longer, seller concessions are normal, and now prices are giving way.
I suspect there will be a day, soon, where I will have to check the boxes:
PROPERTY VALUES - declining
DEMAND / SUPPLY - over supply
MARKETING TIME - ?
Marketing time here is a myth; Realtors re-list the property under a different listing number when the listing is expired, canceled or is withdrawn. So one can't reasonably extract the true marketing time in bulk from the MLS.
Demand as determined by job creation is not the problem. Affordability is a big problem and buyers with lower credit scores are the bulk of the demand. Investor demand and second home demand has declined. I suspect when layoffs and negative economic growth happen, I can say demand is declining.
Over supply is not really defined as I can determine. How many months of inventory?
Property values are declining from peak but what percentage drop over what time frame constitutes a declining property value market? I know I can grid sales from 12 months, 9 months, 6 months, 3 months, and current to see if a pattern exists that is monotonic and decreasing. I can also look to see if listings exist that are below contract price of a current sale or past sales. If both of the above conditions exist, I would say the market has declined or is declining. However, what percentage constitutes a definite declining market?
I am flying by the seat of my pants on this. I don't have any history with appraising in a market that is turning down and what constitutes "declining", and "over supply". Fannie Mae does not define these terms. Anyone want to offer up a definition or test for same?