So many ways to measure
Markets are rarely identical and what happens as a nation isn’t necessarily what happens in a county, or what happens in an area, or even a submarket.
We hear a lot about the improving market conditions that are occurring nationally, but as in all things real estate, the market really is fundamentally local. I live and work in the Ann Arbor market. Not all markets within this area are moving in the same direction, or at the same pace. Even within Ann Arbor there are differences, and the data below represents current information comparing the Ann Arbor school district as a whole to one area within Ann Arbor, area 82, which encompasses a wide market but is the west side of town as well as into the western suburbs and rural area within the Ann Arbor school district.
How can you go about measuring the market? There are a number of different ways, but what I am doing now (and I do change things up as I learn of new techniques) is taking one years’ worth of data at a time, run on a monthly basis and compare and measure how markets change. The data is run as one year periods because it neutralizes the seasonality that you see happening in this area. It is almost clock-work to see our local market start to slow after Labor Day, and to start to pick up in February or March, depending on the weather. In addition to measuring year to year, I have also eliminated from the data below distress sales and “to-be-built” properties because including them skews data. This is addressed in a previous blog post. Depending on the market, it might make sense to include the distress sales but Ann Arbor hasn’t had a lot in general (Thank You University of Michigan) and if they are included the market actually looks like it is picked up more steam than it truly has. Apples-to-Apples with the data below.
My findings are in graphic formats below with a small explanation underneath the graph.
Number of sales
We are seeing an increasing number of sales in both the entire market and area 82. For instance, the one year period of 2011 showed 805 arm’s length sales, and in 2012 there were 939 sales, 2013 had 1,054 sales for the year. Clearly the numbers of sales are increasing. In area 82 our market jumped from 210 sales in 2011 to 260 in 2012 and 299 in 2012. Based on this information the expectation is around 88 sales per month for the entire market and 25 per month for area 82. As there are 139 available properties in the MLS for the entire school district today (2/9/14) and 36 in area 82, there is about a 1.6-month supply for the overall market and 1.45-month supply for area 82. Looks like an undersupply of properties, doesn’t it?
Days on market
The chart above shows the differences in days on the market in both the wider Ann Arbor market and area 82. Area 82 consistently has had quicker absorption than Ann Arbor as a whole, but take a look at how the market dipped in both segments to a low point in June/July 2013 and has been increasing steadily since that time. My take on this is that as inventory has increased (as evidenced by the number of sales above) that there are more options and therefore houses are not selling quite as quickly as they were at the peak in 2013. At this time days on market is still very short with the most recent reading showing 43 as a whole and 35 in area 82. Surprisingly close to the expected absorption rate addressed in the graph above.
There are more graphs and charts that I will examine, but I am going to save that for the next blog post, so as to keep you interested and coming back J. These other indicators include the list price to sales price ratios, median price over time, and median price per square foot. They also include my favorite, the contract-to-listing ratio which some of you are aware of from previous blog posts.
Hope you enjoy this information and find it useful. As always, if you have questions about the market from the perspective of the local appraisal expert, call or write. I am always happy to field whatever calls or emails that I can.
Data above is culled from the Ann Arbor Board of Realtors MLS
Rachel Massey, SRA, AI-RRS www.annarborappraisal.com