One of the reasons an appraisal value is a point date, is that markets are fluid. What happens today, may not happen in the future, and likely did not happen in the past.
The image below is a chart of four different price segments, as well as the overall market for Saline Michigan. It is run by price ranges (not the way we appraisers do our analysis, but relevant in measuring where the activity lies). This data is over a six-month period, with three data runs in March, June and September. What shows is an increasing inventory overall, and currently lower concentration of listings that are under contract. The June market data showed the highest absorption of the listings into the market, but we expect that since the summer months are most active. The lowest absorption is shown at present, which is also expected as the market softens most often after the height of the summer.
Saline has consistently had a lack of inventory for less than $200,000, but as of 9.21.18, there were three offerings of single-family properties (not including condominiums) for less than that. The number of active listings has increased across the board, but the most active markets continue to be between $201,000 – $400,000 based on this information. It does show a sharp drop off over $300,000 in the most recent data run. Meanwhile supply builds in the $401,000-$500,000 range. This is likely due to numerous “to be built” properties being input into the MLS in this price range. Throughout this data set, the market over $500,000 has shown balance to an oversupply based on the number of available properties for sale.
The reason for a point date, is that markets change. The evidence is easily seen here, with the supply and demand factors changing between each data run. The current information shows the market is slowing in terms of absorption, and the amount of inventory overall. The caveat of course, is that each of these price segments is different, and some are staying level as far as inventory and absorption (mainly the $201,000-$300,000 range), while others are changing rapidly. If an appraiser were to value a house at $350,000 in March, there would be very little competition based on this information. If it were in June, the competition would also be limited, but if it came on the market today, there would potentially be 20 other properties competing. This does change the dynamics of the appraisal analysis, even if it only relates to how long it is expected to remain on the market.
When markets are sizzling hot, there are few listings operating as competition for a property. When markets cool, listings become ever more important as part of the analysis. Understanding what is happening as far as supply and demand in the market is critical, and should be part of any appraisal. Knowing where the subject property stands in terms of the competition is part of the analysis.