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Ann Arbor snapshot

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.

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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?

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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

January 25, 2014 Washtenaw County market snapshot

January 25, 2014 Washtenaw County snapshot

 

On January 11, 2014 I posted a snapshot of the Washtenaw County market showing the number of arm’s length sales in each school district as well as the change in price per square foot over time and the current number of offerings and houses under contract.  

After some consideration, I have eliminated all “to-be-built” houses as they are starting to flood into the market locally. These houses are not truly on the market as they are not yet started and are not available for immediate, or even generally quick, occupancy.

The data below is a snapshot of the supply and demand factors for the various Washtenaw County markets as of 1/25/14 through the Ann Arbor Area Board of Realtors MLS.  Instead of showing price trends in this snippet, this data shows the number of arm’s length sales of houses that are already built, or under construction, compared to how many are on the market at this time that are NOT showing as under contract.

  • The number of sales relates to one year prior to 1/25/14 and the number of active listings are the number that were available and not under contract on that day.
  • The number of months’ supply relates to, given the number of historic sales, how quickly the current inventory “should” absorb.
  • The contract-to-listing ratio relates to how many of the current listings are under contract and to me, that number is most telling of current activity. Historically I find that between 25% – 30% is a typical active market and that less than 20% is generally slow, favoring buyers. Over 35% we start to see a seller’s market.

Without further ado, here are the results:

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Based on this information, Ann Arbor still is in seller’s market territory, as is Lincoln and now Milan (when I did this last, Milan was showing over-supplied but that relates to a large number of “to-be-built” houses). Saline, Dexter, Chelsea, Ypsilanti, Willow Run and Whitmore Lake seem to be in a more normal market, and Manchester is slow with the greatest supply compared to historic demand. In most cases, inventory is in the 2-month range, which is an under-supply. Ann Arbor is particularly undersupplied.

Not all houses that are on the market are appropriately priced, and if a house is over-priced for the market (due to condition or functional/external issues, or just too optimistic pricing); these houses show as part of the supply chain but are not yet truly competitive. When Realtors ® talk about how they are finding the market to be highly undersupplied, my opinion is that the market itself is undersupplied, but not significantly so, but there is a definite undersupply of appropriately priced houses in good condition.

If you are curious about the market from the perspective of a 30-year market veteran, follow this blog or contact me directly. I have experience both from the sales side (from 1984-1989) and as a full-time appraiser since 1989. I am always happy to discuss your needs on the appraisal end and am open to discussion as to how to best present data that helps you.

All the best to all of my readers!  Rachel Massey @ www.annarborappraisal.com

Re-posting a friends blog

http://www.appraisalbuzz.com/buzz/blog/2014/01/18/non-lender-valuation-consumers-should-tread-carefully#sthash.bNW9vXJe.dpuf

 

Good stuff Woody!

 

For anyone considering getting an appraisal for non-lending work, please read. Woody makes a compelling argument for why you do not want to engage an appraiser based on fee. Anyone who is looking for the best local appraisers should do their research to get the best possible unbiased results.

I have one further suggestion regarding this issue and that is to ask other appraisers who they would recommend as well as local Realtors. Between the other appraisers and a Realtor, the likelihood is that you will get steered in the right direction. It is not worth saving a few dollars only to lose thousands on an inadequately researched and developed appraisal.

 

Even homogeneous markets are best served with personal observation

Even homogeneous markets are best served with personal observation

A couple of weeks ago I ran a posting of recent closed sales in the Ann Arbor market compared to four online-automated valuation models. The variances between actual sales price and these models were extreme even though the houses had adequate exposure to the market. My thought was that the computer systems would have picked up these advertised houses, and given that data, would have been a lot more accurate. It was a surprise to see how flawed the information was.

In order to be fairer to these online sources, I ran it again for a very homogeneous area and included only arm’s length sales that occurred in the past month. I found seven recent sales that are very standard subdivision houses, and compared them to four different online valuation models as well as the assessment values. The list below shows the actual sales price and how each of these models stacked up.

Names have been changed to protect the innocent

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  • Model A was as close as 1.79% and as far off as -7.02%
  • Model B did not hit on two properties but of those that it did it was as close as 9.14% and as far off as -50.98%
  • Model C was universally under sales price and as close as  -0.19% and as far off as -13.33%
  • Model D was universally high and off from 25.35% to as high as 133.61%.
  • The State Equalized Values were also off on most of these properties, but to the benefit of the homeowner in that the assessments were lower than sales prices. The smallest difference in price was -10.92% and the largest was -30.59%

What does this mean to you? It means that even in the most homogeneous areas with similar houses and decent sales activity, the valuation models do not stack up with reality for the most part. While some models appear to be better than others are (Model A was closest of the four), it really does not make sense to rely on these databases for a value estimate on your home.

If you are going to list your property, talk to an agent for the correct pricing, or call an appraiser. If you are going through a divorce, dealing with bankruptcy, or need a value for estate planning, talk to a local appraiser. Do not put your trust of this valuable asset in the hands of a computer.

Enjoy,

Rachel Massey, SRA www.annarborappraisal.com

 

Bromley Park – Superior Twp

 

Bromley Park

 

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Typical housing images from subdivision

Bromley Park is a subdivision developed and built by Pulte Homes from 2002 through 2004, south of Geddes, north of Clark and east of Harris in Superior Township in the Willow Run Public school district. It encompasses the streets East and West Avondale Circle, Ravenshire, High Meadow, Wexford and Glenhill Drives. The subdivision has open green spaces to the west and to the north up to Geddes Road, and along the south and east there are many wooded views. Along the interior streets there are some areas with woods and walking paths. The development has a shared pool with the condominium development to the west.

Further information about Bromley Park can be located by accessing the development website at http://www.bromleypark.org/

Recent market data:

  • From 1/1/13 through 1/1/14, there were 26 sales reported through the Ann Arbor Board of Realtors MLS in Bromley Park. Of these, seven were bank owned and two were short sales, leaving 17 sales that were arm’s length in nature (65.38% of the market).
  • From 1/1/12 through 1/1/13, there were 20 sales reported, of which eight were bank owned and six were short sales leaving six arm’s length sales (30% of the market). 
  • From 2012 to 2013 there was a rapid decline in the number of distress sales, which do show as helping the market recovery in this subdivision. As of 1/13/14 there were three houses for sale within the subdivision, two under contract and one available for sale. The two under contract are listed for $165,000 and $170,000 and are a short sale and a bank owned property, and the one that is currently available is arm’s length and offered for $199,900.

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Data above was culled from the Ann Arbor Board of Realtors MLS with the data run from 1/1/11 through 1/1/14.

Verification

Verification

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As Realtors ® most of you have had the experience of calls, emails and even text messages from appraisers who are trying to verify information in a sale that you participated in. As annoying as this can be, it is important, in particular if there are any unusual circumstances to the sale.

Although most MLS now allow for multiple photos within the MLS, photos are generally presented in such a manner as to sell the property, not directly for the appraisers benefit. How often have you looked at photos in a listing ticket and thought the house was perfect for a buyer, only to find when you get there, that the condition was nothing like what was represented in the listing? This happens quite often, and it does by the virtue of the listing being a tool to help you sell the property. If the house doesn’t appear attractive, the likelihood is that many potential buyers won’t want to see it.

This comes back to the calls from the appraiser. Most appraisers want to get a real understanding of the condition, updates and upgrades, and significant remodeling of that property. While the listing ticket may explain these features, often times it overlooks issues that are important. As an appraiser, I actually prefer to communicate with the selling agent more often than the listing agent in order to gain a real understanding on the house that I am potentially using as a sale.

Why? The main reason is that the agent will have shown that buyer other houses that were competitive, and will have a clear understanding why their buyer opted for this property over the others. Think of how powerful that information is to provide to an appraiser using the sale as a comparable! Your buyer saw ten houses, and of the ten houses, they chose this particular one because it had XYZ features that were important.  Feel free to share this information with appraisers who take the time to contact you.

Why your buyer actually chose a house is relevant. Sometimes a buyer chooses a house because it is next door to their best friend, and they are willing to pay more for it than everything else. Wouldn’t that be relevant to the appraiser using it as a comparable sale? How about the house that sold to a relative with a different last name and sold at a discount; that information would be equally relevant.

As an appraiser, I spend a lot of time and energy helping agents who contact me with questions on how to handle valuation questions. I also find that most agents I talk with are extremely helpful, but occasionally I run into one who will not answer questions, or answer them in ways that are not helpful. Contrary to popular belief, agents and appraisers can talk and garner information from each other. Just like you as an agent, have a fiduciary relationship to your client; I as an appraiser have an obligation to confidentiality, and cannot share certain information such as confidential client information and most importantly, assignment results.  This is similar to your fiduciary duties to your client and we both take these duties seriously. It does not stop us from communicating and learning from each other.

Feel free to call me or email/text me for advice, and at the same time, please do take the time to respond to questions that I will have from you regarding a specific property or two.

Thank you for your time.

 

Rachel Massey, SRA www.annarborappraisal.com

 

Washtenaw County snapshot

Days on market and current activity Washtenaw County, MI

Based on my experience, as days on the market for a property decreases, prices tend to increase. When days on market start to increase, prices tend to stabilize or decline.

One of the largest obstacles in measuring market direction is that closed sales are usually contracted for sale one-to-two months earlier than the closing. As such, the closed sales data lags even with the most recent data available. Including contracted sales would indicate a higher number of days on the market, but as many contracted sales do not close, the data below includes only closed sales, and absorption is addressed further in this discussion.

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The chart above is a compilation of the different school districts in my local area, Washtenaw County. The data refers to days on market of sales, ran in an annualized manner. In other words, each data point is one years’ worth of sales but presented month-by-month. This helps eliminate the seasonality that we see as our market normally slows down after Labor Day and start to pick up in February.

What is noticeable at first glance is the convergence of days on market to a low point around June to July 2013 and a steady increase in days since August 2013. All districts are showing an increase in days on the market other than Manchester, and are mostly back to levels seen in late 2012/early 2013.

After examining the days on market, the next step is to look at how many sales occurred in the most recent period in each market (all of 2013 in this case) and then look at how many are on the market, not under contract, within the first two weeks of 2014. This information provides an estimated supply based on the most recent years’ worth of sales. The last column that chart is the contract-to-listing ratio (CLR) which simply looks at all offerings and compares the number under contract to the total number available and derives a percentage of absorption. From my perspective, a market that is active is normally hovering around 30% CLR and when it pushes upwards to 40% or over, is very active and a seller’s market. Conversely, when it is 20% or below it is much less active, and much less than 20% indicates a buyer’s market. Of course the ratios are all dependent on agents reporting contracts within the required period of their MLS so that it is not lagging by more than a couple of weeks.

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At the same time that the number of days on the market declined in most areas, the number of sales increased. For example, Ann Arbor went from 805 arm’s length sales in 2011 to 939 in 2012 and 1,086 in 2013; yet in 2013 days on the market was virtually identical to 2011 (although it was lower in 2012). Ypsilanti went from 115 sales to 158 to 220, almost double the first year reported, yet days on the market dropped. In each market shown, the number of arm’s length sales rose in this period.

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All data is gathered using the Ann Arbor Board of Realtors MLS. Sales data excludes distress sales and GLR MLS but does include Realcomp and therefore there is some duplication of listings throughout. This is not considered a significant sampling problem due to consistency in application throughout all market segments and current/contract offerings. Data run from 1/2/14 through 1/11/14.

Based on this information, my interpretation is that Ann Arbor looks like it is still very strong, and Lincoln appears to be in the throes of a seller’s market at the moment. Chelsea, Dexter and Saline are in the 20% range, meaning slow but a balanced market, and Manchester and Milan may have crossed into being a buyer’s market at this time based on these ratios.

Note, in each market run, the entire school district is examined, not submarkets. In an appraisal, the appraiser will look at the submarket, or “micro” market that relates to the subject property. If you are interested in knowing how your property adds up in today’s market, contact your local real estate expert for an analysis.

Enjoy – Rachel Massey www.annarborappraisal.com

 

 

 

Measuring market change

Measuring market change

Most of the measurements we see reported in the MLS relate to median price change over time, not price per square foot. As house sizes rise, the price per square foot falls and does so because price per square foot includes not only the gross living area, as well as the garage, basement, improvements to the house, decks, patios, and other site improvements, and even more importantly, the site itself.

Since there is a diminishing return as house sizes increase, it is easy to see how a shift upward in house size could make the market look like it is improving at a higher rate than it actually is. Conversely, if house sizes are shifting downward, then the market may look like prices are going down when they are not.

In this first graph, it looks like the market dropped in early 2012 to late 2012 and then had a meteoric rise in mid to late 2013:

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In the second graph, the market shows only a slight leveling of price increases in 2012 and then another slight leveling in early 2013 followed by a much steadier price increase towards the end of 2013.

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Which of these graphs better represent the market? How about a blending of the data? If houses decrease in size in general, the price per square foot rises at a greater rate, and by looking at both measures, I feel the read of the market is more realistic and I have accounted for the change of buyer preferences. Sometimes one indicator is more reliable than another, and in those cases market change is best measured by the one that makes most sense.

The next chart is what I used for my graphs. Statistics are run on a yearly basis but one month at a time. The data presents one year of data for each segment and is a nuanced way to measure market change. As an appraiser I am tracking the number of sales, the list-price-to sales-price ratio, and the median sales price, the median sales price per square foot and days on market cumulatively.

 

The data below comes from information culled from the Ann Arbor Area Board of Realtors MLS and excludes distress sales and duplicate listings.

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The presentation above is just one way to look at changing market perceptions over time. I will continue to present data about my local market as I see it. Check back often, as markets are fluid and are subject to change rapidly. Forces that cause market change include, but are not limited to, change in interest rates, change in inventory levels, introduction or withholding of distress inventory, tightening of the money market, catastrophic events, local employment, etc.

As always, if you are in need of a local expert in the Washtenaw County market, go straight to the local residential appraiser expert, Rachel Massey, SRA.

www.annarborappraisal.com

Sales compared to Valuation Models

Consumers rarely see comparisons between sales prices and alternative valuation models accessible via the web. I’ve not seen an actual comparison to recent closed sales to these models and thought it would be an interesting exercise to see how they stack up with properties that closed within the past couple of weeks through my local MLS.

The following data is a compilation of 21 recent sales in the Ann Arbor school district that closed in mid to late December 2013. These houses were exposed through the local MLS and picked up by a variety of different valuation models. Since these houses were exposed on the open market, my thinking was the models would be fairly accurate, but nothing seems to be further from the truth! 

The value estimates are all over the board as far as too high, or too low, with only a few exceptions.

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The sales above are sorted by sales price. To help you read this chart, the layout flows as follows: zip code and some comments about the property. The next column is the actual sales price, followed by a valuation model, followed by the percent difference between valuation model and sales price. For example, on the first sale, the sales price was $80,000 and the first estimate was $104,654 or 30.82% over-estimated compared to the sales price. There are a total of four different models used as well as the State Equalized Value from the tax roll (multiplied times two as is practice in Michigan). 

Upon review, the lower priced sales were over-estimated and the higher priced sales were under-estimated, but even standard subdivision houses that were exposed through the MLS had discrepancies in the variance. This was unexpected as they were on the market, in homogeneous areas, and not in need of work, so why did the models fail?

In my opinion, the models fail because the market is simply not perfect and can’t easily be measured by pure statistics. Value really relates to a specific market segment, buyer preferences, condition (that can’t be measured by computer model) and locational nuances.

Instead of either overpricing a property based on potentially erroneous information in these models, or leaving money on the table by underpricing; hire a local appraiser to provide you an expert analysis of the market and where your property fits within it.

Rachel Massey, SRA is a local expert with close to 30-years of experience in and around the Ann Arbor area. She can be reached at 734-761-3065 or through email (rachmass@comcast.net) or through her website at www.annarborappraisal.com. Rachel is available to help you with your appraisal needs for divorce, estate, tax appeal, bankruptcy, etc.