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Stats on decline in market

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kenny ebinger

Thread Starter
Freshman Member
Joined
Feb 16, 2006
Professional Status
Certified Residential Appraiser
State
Michigan
Just wondering what other appraisers are seeing in this wonderful declining market? m2:
 

Narkissos

Junior Member
Joined
Jan 9, 2006
Professional Status
Certified Residential Appraiser
State
Michigan
Depends on the area. I have charted as much as a 40% drop in some areas of S.E. Michigan. Some areas are so bad the market is driven by the REO influence. In many of those areas the decrease in values has been shall we say SIGNIFICANT.


Don't forget to check the stable box!!! :rof:


It is not just the decrease in values. It is also the excess inventory. Some areas have 24-36 months worth of inventory, with homes selling at a rate of 2 per month. In my area sales activity historically slows for the next few months. With an expected increase in new REO listings, I am sure we have yet to even come close to the bottom.
 
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Lawrence R.

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Joined
Mar 27, 2007
Professional Status
Certified General Appraiser
State
South Carolina
Do these go hand in hand.

I have not seen evidence of a decline in prices, though I keep waiting for it...in my area.

I do however think there is a trend toward oversupply. I can't quite put my finger on it yet, but I think within 30-60 days, there will be more on the market than the buyers can absorb.

How do you think it will be received if you mark stable for price, but oversupply for the other?

Do you think you should/could? Perhaps by the time the oversupply hits, the prices will begin to drop, but what if they don't?

Would love to hear some thoughts on this.
 

Charley Horse

Junior Member
Joined
Aug 28, 2004
Professional Status
Certified Residential Appraiser
State
Michigan
How do you think it will be received if you mark stable for price, but oversupply for the other?

… I’ve done it… then I make a comment something to the effect that “over the past 6 quarters, property values appear to be stagnating; however, should oversupply condition not improve, values could continue to erode going forward”…

…for those markets where I do the majority of my work redundantly, I maintain the following data in conjunction w/sequential sales of the same properties (IF THEY EXIST) to support my analysis… lacking sequential sales, I let the graph tell the story...
 

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Kali the Boston Terrier

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Joined
Jul 7, 2003
Professional Status
Certified General Appraiser
State
Michigan
Economically speaking you cannot have an oversupply of a product and not have decreasing prices. What you may have is a larger than normal inventory, or most likely circumstance in real estate you have lagged data. One is a leading indicator of the other, and with real estate prices are sticky and are typically lagged 6-9 months.

SO if you see an oversupply, than economically sound logic is for decreasing prices. Which can be easily trended using a simple supply and demand curve.
 

Charley Horse

Junior Member
Joined
Aug 28, 2004
Professional Status
Certified Residential Appraiser
State
Michigan
Brian...

... so you are saying in my previous post's example, I should mark "declining values" even though median prices, nor sequential sales of the same properties do not appear to support that statement?

I agree, given excess supply relative to demand, there's a strong probability that prices will decline, BUT I don't feel that's an absolute statement until factual evidence supports it as such...
 
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Michigander

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Joined
Oct 23, 2003
Professional Status
Certified Residential Appraiser
State
Michigan
I always kept a running total in every appraisal I developed, of the absorption of pending sales from current listings. Ann Arbor had a very robust market until 2003 and then in early 2004 I started to see the ratio of pending sales to listings decreasing. This was the first sign in my market that the market was starting to stagnate. After the pendings started to decline, the houses stayed on the market longer and soon the prices started to stagnate and then fall. I believe I pegged a stable to declining market already as early as mid 2004 in Ann Arbor (in many submarkets, not all of course). The funny thing is that even now I still see appraisals come through with "stable" as the market trend in Ann Arbor. Are people nuts?

So Charley, Brian has nailed it with the issue of the market times increasing. When they do, it is often the start of a decline, and after you have seen it happen a few times it is easier to peg. I really like looking at pending sales activity because it does speak of where the market is heading.
 

Artemis Fowl

Senior Member
Joined
Mar 16, 2004
Professional Status
Certified Residential Appraiser
State
Michigan
...in real estate you have lagged data. One is a leading indicator of the other, and with real estate prices are sticky and are typically lagged 6-9 months...

I saw that happening...
Inventory kept growing, DOM kept growing, total sales volume was decreasing, employment and population heading south (literally). I kept thinking that the sale prices were gonna go any minute. It did take a few months. Took almost 18 months for listing prices (generally) to trend decreasing. Some STILL try to get 2004 prices...those are the guys that sit for 400+ days.

It's been very educational these past few years.
 

Charley Horse

Junior Member
Joined
Aug 28, 2004
Professional Status
Certified Residential Appraiser
State
Michigan
I absolutely agree… an oversupply market and increasing marketing periods are indeed leading indicators of declining values, BUT… given my experience to date, I would be apprehensive to state that prices are declining (in any given market) unless there exist hard evidence supported by actual sales that prices have declined… particularly in a low density market where some metrics can create false assumptions given a lack of adequate sales activity.

When we check those boxes, are we suppose to check them based on intuitive data of what the market is going to do or what the current market is doing w/support from actual sales?

In my example, 3.26% of my sales activity during the indicated timeframe were sales of the same properties which actually increased in value a median 3.92%; those metrics in conjunction with the median values in my graph tell me this specific market is stagnating… not decreasing or increasing and I don’t have a problem checking stable as a result. I comment on the oversupply condition and state that should this condition not correct, values could erode going forward … but until I can PROVE it, within the scope of my analysis, I don’t check box as declining.

I spoke to several other appraisers in a Narrative Report Writing class in Lansing last week that said despite an oversupply supply of listings in the greater Grand Rapids market, they said there are still some niche neighborhoods whereby sales prices are relatively stable. I just don’t think you can make a blanket statement, that although a given market may be in oversupply, prices/values are declining until they actually start to decline.

I realize I’m a relative newbie in this profession… and have a significant learning curve ahead of me (if I’m lucky enough to live that long…)… what really concerns me is I have queried numerous appraisers within my market area, and have found very few appraisers, if any, agree on the criteria for establishing this condition. That’s why I’m posting on this thread… in an attempt to stimulate some discussion that would provide some insights in regards to this specific issue.
 
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