Market areas and Market Trends

[Fernando]

Regression and avms can't take everything into account because there are differences that are not tracked or organized in a database.

I just did one where the most recent comp sold for like 10% less compared to other comps. The reason is it's on a hill and you have to park on the street and walk up 25 steps to get to the door.

That reminds me of an appraisal I did in SF.
It was a very very steep hill and I was lucky to find parking on this dead end street.
And then I had to walk up so many steps to the main door.
Had good views though.

 

[RCA]

More significant would be mortgage rates. Do you have rates as your variable? If so, does it have much affect on sales price?
Instead of many detail variable, there are limited number of variables in each market which have most affect on price.

Sure, I have done that. It is easy to find the historical rates and add them as a regression variable. But there is a wide difference in mortgage rates at any one time - and at least in the SF Bay Area, many potential buyers have plenty of cash for large down-payments.

 

[Fernando]

Sure, I have done that. It is easy to find the historical rates and add them as a regression variable. But there is a wide difference in mortgage rates at any one time - and at least in the SF Bay Area, many potential buyers have plenty of cash for large down-payments.

Do you have variable whether how large down payment or all cash? I would think from personal experience, all cash have "lower" prices.

 

[RCA]

Do you have variable whether how large down payment or all cash? I would think from personal experience, all cash have "lower" prices.

You have worked in the Bay Area long enough. It depends on timing of course. But back around 2019-2020, cash buyers often just pushed the non-cash buyers out of the competition. That is to say, you just didn't stand much of a chance of buying a desirable house, if you couldn't make something like a 60% down payment. This was particularly true if the seller was in a hurry to sell.

 

[JBruemmer]

Well, that didn't take long. Here's one solution being offered in forums:

Market Condition Analysis - Aloft's Appraiser Toolkit

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RPR in your local MLS will have this.

 

[JBruemmer]

The main challenges with market conditions analysis in real time are

1) Seasonality - most of the price gains occur in the spring and spring follows winter, a low activity season.

2) Segments - not all segments are doing the same thing. You can look at bigger group data like state or county and the monthly trends are obvious, but when you go smaller to zip codes or smaller, you have less data and price info can swing wildly looking at monthly. Even if you group it quarterly it can still swing wildly.

3) Data lag - you have the gap between contract and closed, then the aggregators have a lag in compiling the data. Data is 2 months behind when most of the price change for the year occurs in 3-4 months of the year.

I believe RPR (real property resource) located within most MLS' update their data on the 5th of every month.

 

[Joe Flacco]

I believe RPR (real property resource) located within most MLS' update their data on the 5th of every month.

That is the date they put on it but the date when it is actually released is around mid month. But that data represents contracts signed 1-2 months ago.

 

[Joe Flacco]

Not only that, monthly data swings wildly unless you are looking at minimum county, or metro area level data. You are not looking at zip code or neighborhood data and getting anything meaningful on a month-to-month basis. Most of the time even quarterly which is three months grouped together at a time is great at the zip code or neighborhood level.