How to define a declining market?

[DMZwerg]

Along the same lines...how long does a trend have to point in one direction? I'm seeing huge declines in average and median values in 4th quarter 2008, but nice a nice recovery in 1st quarter 2009. Now...if 1Q 2009 is still lower than 1Q 2008, but much higher than 4Q 2008 - is it declining or increasing? Do most appraisers look at markets seasonally or linearly?

Short answer(s):
Um, Q1 2009 isn't over yet ... just FYI

Also, in mathematics, 2 points only determine a straight line, but it takes a minimum pof three points to determine a curve. So to answer your question quickly I would suggest a minimum of 3 point if you want the "quarterly averages" dictate your market projection.

Longer answer:
What was the trend for Q1-Q4 in 2005? 2006? 2007?
If you have all that data then you know typical market movement.
You can look at typical deltas from Q4 previous year to Q1s, come up with probably variances, then comparing it to current increases make a determination if it is smaller than normal and by how much.

Here is an example ... in one city I track average sales price dropped $24k from Q4 03 to Q1 04, $21K in 04-05, $6K 05-06, $8K 06-07, $19K 07-08 and Q4 08 is back to within $500 of the Q4 03 average value. Since Q1 -09 ends March 31st and the MLS data is not updated for up to 10 days I will not have firm Q1 09 data until then but I know from looking at Q2 average values that prices tend to rise in Q2 by more that they dropped in Q1 (except for 2006 when they dropped for some reason). Now I look at Jan and Feb and see that Jan ws $14k over the Dec low but Feb is $2K below Dec. Knowing past trends warns me this seems to be following the 2006 model more than current but that dips in Feb and Mar are not unherd of, therefore the market is either stable and returning to normal or is continuing to decline. But that is my market ...

Your market saw a recent increase you said. Look again at my data and you will see that SO FAR in Q1 there has been roughly a $6K increase from the Q4 average but it was a blip, therefore maybe you really need to be looking at the monthly trends to really have a feel for it and you should especially should be looking at what it has been doing in the last week if possible as there may have been a "blip" like what I saw caused by lowered interest rates, etc. We also track the median, median of upper half and median of lower half besides the average (as well as average $/sf and half a dozen other factors) and the "blip" is way more telling in that median prices dropped in Dec, shot way up in Jan, and were slightly above rather than below Dec in Feb, contrary to the average values (which also evidenced a much smaller "blip".

So the bottom line is I can not advise you as to your market, you have to do that, but I can caution you to check more monthly figures and mention that there may be reasons for "blips" that could bring up quarterly averages. Hope this all helps.