As in much of the United States, our local Ann Arbor market has experienced a significant decline in the number of bank-owned sales (known as REO for “real estate owned”) compared to the number of regular arms length sales. In graphic format, this is what it looks like on an annualized monthly basis:
In brief, the percentage of REO sales have gone from 10.26% of the market (MLS only) in the Ann Arbor school district, to 2.84% as of February 1, 2015. Ann Arbor hasn’t been hit hard by the foreclosure market as was much of the rest of Washtenaw County, but it still did make up a portion. I find that using graphics to show my intended users what a market is doing, is helpful, but only if there is some analysis that is offered alongside it.
To run my market data, I set up a spreadsheet and track the number of sales, the list price to sales price ratio, the median gross living area, median price per square foot, and days on the market as the following example shows:
What is telling to me, more than anything, is what is happening in the market as far as contracts. For example, look at the number of sales that occurred for the entire Ann Arbor market, from 2/1/14 through 2/1/15 – a total of 1,059 sales. This means, if the market is moving at the same general rate, the expectation is of 88.25 sales per month, rounded to 88 sales per month. With 124 active listings, not under contract, that is a supply of only 1.41 months of inventory. When inventory is this low, very often prices will be pressured upward due to limited choices. If you look at the number of houses under contract, compared to the total on the market (79 under contract plus 124 active for 203 total) and divide the contracted sales into the total listings, 38.92% of the listings on the market are under contract.
I have been using this “contract-to-listing-ratio” in one iteration or another since @ 1992, and am comfortable saying that with 38.92% of the houses on the market in the MLS under contract, we are in a rocking hot late winter/early spring market, at least for the overall Ann Arbor market.
Each appraisal that I do, looks at both the macro market (such as the entire Ann Arbor school district) and micro market, which is the market in which my subject property is operating. Sometimes they are moving in different directions, or at different levels. This is the type of analysis, that in my opinion, is important for the appraiser to take in order to keep with the market. In addition to working these types of graphs, I find it critical to talk with the local REALTORS who are active in the market, as well as attend Open Houses to see what activity is taking place.
When you hire an appraiser to value your most important (or one of your most important) assets, why settle for anything less?