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What data do you use to define declining Market

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Colorado Guy

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Joined
Feb 9, 2003
Professional Status
Certified Residential Appraiser
State
Colorado
I have been posting the following table into all of my appraisals:
List/Sold Avg
Year Low High Avg #ofSales % Avg DOM
2005 $279,900 $875,000 $591,280 10 93.62% 159
2006 $174,000 $1,334,395 $497,724 14 95.91% 254
2007 $237,500 $745,000 $424,820 15 95.63% 103

The above data is all sales for townhomes in a specific subdivision (a pretty nice one!).

So two questions.

1. What is your take - is this enough data to determine increasing, stable or decresing property values?

2. Of the 3 lables (increasing, stable or decresing) what would you call this specific property based on the above data?

As always - thanks for your input. It is always interesting to see what other appraisers are doing.
 

Tom Woolford

Elite Member
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Joined
Nov 20, 2005
Professional Status
Certified Residential Appraiser
State
Florida
I usually look at a specific market segment within the subdivision that relates to the subject usually by GLA and age. If there is insufficient info for the specific segment, I expand to the whole subdivision, and look at $$/sq ft also. Failing that, I use overall county statistics.
 

WEAVER APPRAISALS

Freshman Member
Joined
Jan 30, 2008
Professional Status
Certified Residential Appraiser
State
North Carolina
i would also add the median sales price instead of the average. this will get rid of the extreme sales. also run one on current listing. the listing data will help prove the what the trend is doing on the marketing time, supply and demand and it may help prove that the values are still declining. based on this data it appears the values are declining and have been since 2005. it would be interesting to see what the median list price is. this data also shows the marketing time is getting back in line in 2007 so the declining values may be at the end of the decline. i think the listing data would help prove this. 2006 shows a very high sale of 1.3m. this may be throwing off the average sales price and you would not be getting a true reading on the decline from 2006 to 2007. the sales from 2007 seem to be more in line with 2005 in the low and high range. so it appears that there was a large decrease from 2005 to 2006. it also shows another large decrease from 2006 to 2007 but that one sale of 1.3 could be misleading and throwing off your average sales price. this is why its good to compare the average with the median. so its hard to answer you question of increasing, stagle or decreasing until i see the median price range as well as what the current listing are showing. hope this helps
 

Lloyd Bonafide

Senior Member
Joined
Jan 15, 2006
Professional Status
Certified Residential Appraiser
State
California
You have such a wide variation is sale prices, from 174K to $1.3M+, that the average sale price may not tell you much. If your neighborhood is defined just as this development, then I would compare trends in sale prices over the past year for specific models, against the prices of active listings, to determine if prices are declining or not. Also, most clients are not concerned about prices increases or decreases over the last 2-3 years, as much as prices over the last 6-12 months.
 

Wendy

Senior Member
Joined
Feb 23, 2004
Professional Status
Certified Residential Appraiser
State
Florida
A blind dog could tell my market is declining. No table needed. :(
 

Tom Woolford

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Nov 20, 2005
Professional Status
Certified Residential Appraiser
State
Florida
A blind dog could tell my market is declining. No table needed. :(

Mine too, but the blind dog is probably more astute than your garden variety underwriter.
m2:
 

Flygirl 152

Senior Member
Joined
May 3, 2006
Professional Status
Certified Residential Appraiser
State
California
I usually look at a specific market segment within the subdivision that relates to the subject usually by GLA and age. If there is insufficient info for the specific segment, I expand to the whole subdivision, and look at $$/sq ft also. Failing that, I use overall county statistics.

Sounds like you and I have the same method Tom. I explain that a quarterly comparative market analysis was conducted in order to determine market conditions in the subjects neighborhood. I then talk about the parameters of the search, and state that it was based on comparable properties with similar improvenet size (1,800 sq. ft. - 2,400 sq. ft.) and any other pertinent information that defines the subjects neighborhood. I also talk about the listings, pendings, marketing time etc.

I pull the MLS data by quarter, and if applicable to the assignment I also include the percentage of increase or decrease of average sale price for the year and quarter. This is standard for all of the REO work I do in order to illustrate the decline. For example;

Quarter ---Increase---Decrease

2006 - #1 2.5%
2006 - #2 2.8%
2006 - #3 3.2%
2006 - #4 2.8%
2007 - #1 3.1%
You get the idea.

I've been doing this for the past 6 or more months. In the beginning it took me so long, but now I've gotten used to it and it goes much quicker. Even if it isn't an REO appraisal, I still pull all the market data and examine the market for the past two years, report what I see, and keep the data in my work file.
 

Flygirl 152

Senior Member
Joined
May 3, 2006
Professional Status
Certified Residential Appraiser
State
California
My illustration didn't come out very good since most of those percentages were listed under the "Decrease" column. I guess the site removes the spaces. Oh well.......you get the idea. : - )
 

Tom Woolford

Elite Member
Gold Supporting Member
Joined
Nov 20, 2005
Professional Status
Certified Residential Appraiser
State
Florida
Sounds like you and I have the same method Tom. I explain that a quarterly comparative market analysis was conducted in order to determine market conditions in the subjects neighborhood. I then talk about the parameters of the search, and state that it was based on comparable properties with similar improvenet size (1,800 sq. ft. - 2,400 sq. ft.) and any other pertinent information that defines the subjects neighborhood. I also talk about the listings, pendings, marketing time etc.

I pull the MLS data by quarter, and if applicable to the assignment I also include the percentage of increase or decrease of average sale price for the year and quarter. This is standard for all of the REO work I do in order to illustrate the decline. For example;

Quarter ---Increase---Decrease

2006 - #1 2.5%
2006 - #2 2.8%
2006 - #3 3.2%
2006 - #4 2.8%
2007 - #1 3.1%
You get the idea.

I've been doing this for the past 6 or more months. In the beginning it took me so long, but now I've gotten used to it and it goes much quicker. Even if it isn't an REO appraisal, I still pull all the market data and examine the market for the past two years, report what I see, and keep the data in my work file.


I update my data monthly, and graph the results. Around here, things are changing too fast to only do quarterly
 

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c w d

Senior Member
Joined
Oct 2, 2006
Professional Status
General Public
State
Florida
I have been posting the following table into all of my appraisals:
List/Sold Avg
Year Low High Avg #ofSales % Avg DOM
2005 $279,900 $875,000 $591,280 10 93.62% 159
2006 $174,000 $1,334,395 $497,724 14 95.91% 254
2007 $237,500 $745,000 $424,820 15 95.63% 103

The above data is all sales for townhomes in a specific subdivision (a pretty nice one!).

So two questions.

1. What is your take - is this enough data to determine increasing, stable or decresing property values?

2. Of the 3 lables (increasing, stable or decresing) what would you call this specific property based on the above data?

As always - thanks for your input. It is always interesting to see what other appraisers are doing.

What does a $237,000 sale tell you about a $745,000 sale and how it relates to a average sale price of $424,000? Nothing with regards to market trends. As the first to reply to you has already stated you'd want to look at homes comparable to the subject with tight GLA and age criteria. The reason being is that the wider your criteria, the more uncertain your results. For example, what if your sample data is 2000sqft in difference and it shows a stable market. You'd have to look at your sales to determine if in the latter part of 2007 more larger homes (and higher prices) sold as compared to the earlier part of 2007 which would result in skewed conclusions.

You also have to consider what is the market? Well, first off it's an area. But, secondly it is the type of home. Is a typical buyer of a 1500sqft house typically going to consider a 3500sqft house? Probably not. Therefore if your subject is a 1500sqft home why would you consider 3500sqft homes in your analysis of the current market trends? Sure, they're probably downward for an entire area but, some sub-markets are more down than others.

I understand that FNMA is looking for analysis of the market for all SFR sales in the market area. I have texts that state as much. But, it can grossly skew your results without further analysis of the individual sales to determine why it is what it is. And to be honest, if the area had 100+ sales in the last 12 months and its not a homogeneous market, I'll be damned if I'm going to examine each one individually and then write a book explaining why my results were what they were.

It should be clear by now what the answers are to both your question. But, if not:

1) Already answered above.
2) I have no idea. The data is too broad to draw any conclusions.
 
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