Randolph Kinney
Elite Member
- Joined
- Apr 7, 2005
- Professional Status
- Retired Appraiser
- State
- North Carolina
Supply, Demand, Balance: How to Measure
http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2006/09/supply_demand_b.html#more
How do you measure a Balanced Market in a suburban market area?
Conclusion: The local market area has reached a state of Over-supply.
Annualized statistics show slight price gains, but the last two months, prices have been declining even before deductions for Concessions are verified and adjusted. This has been occurring even before an oversupply condition has been reached. It is believed that the irrational exuberance of the last three years has impacted normal market behavior. Investors and speculators have left the market.
But what has happened is that prices started getting propped up by concessions, cash-back deals, 80-20 loans {100% financing), cars included in the sales, etc. Now, even with concessions, prices in the last two months show actual declines.
This phenomenon is being played out in many regions across the country. Essentially, all the areas that experienced the big price increases are subject to price declines now. And, all the regions that have housing prices beyond the affordability of 70% of their local households are subject to price declines now with rising interest rates, fuel costs, utility costs, unemployment and a loss of consumer confidence.
http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2006/09/supply_demand_b.html#more
How do you measure a Balanced Market in a suburban market area?
Conclusion: The local market area has reached a state of Over-supply.
Annualized statistics show slight price gains, but the last two months, prices have been declining even before deductions for Concessions are verified and adjusted. This has been occurring even before an oversupply condition has been reached. It is believed that the irrational exuberance of the last three years has impacted normal market behavior. Investors and speculators have left the market.
But what has happened is that prices started getting propped up by concessions, cash-back deals, 80-20 loans {100% financing), cars included in the sales, etc. Now, even with concessions, prices in the last two months show actual declines.
This phenomenon is being played out in many regions across the country. Essentially, all the areas that experienced the big price increases are subject to price declines now. And, all the regions that have housing prices beyond the affordability of 70% of their local households are subject to price declines now with rising interest rates, fuel costs, utility costs, unemployment and a loss of consumer confidence.