market Archives - annarborappraisal

Uncertain future, forgetting the past

Our collective memories tend to be short. Maybe it is human nature? I cannot even pretend to understand why we forget the past or how it may predict the future.

Not that long ago, the United States in general experienced a significant decline in property sales prices due to the Great Recession and the mortgage market fallout. Ann Arbor, the general community I have called my home for over 55-years, was not immune to the fallout. Ann Arbor is somewhat insulated from national market forces in that we are a university community, and the university brings with it a lot of stability due to student life, research and development, and the industries that tie in to the university. That said, we are not immune.

In June 2019 I wrote a piece about Ann Arbor for Mobility Magazine. In it I included a year over year chart of all sales through the local MLS back to 2005. This information clearly shows a declining trend from the 2005 data down to a low point between 2009 and 2011. Price increases both with single-family houses and condominium units started in 2012 in earnest. As of a 4/9/20 data run, there are signs of a leveling of prices as a whole, and a minuscule decline in prices with condominium units.

Year to year trends. Houses in blue, condominium units in orange, new construction included

With the World Health Organization officially announcing on 3/11/20 that the Coronavirus was a pandemic, our world started to change. On 3/23/20, Governor Gretchen Whitmer announced a “stay at home” order affecting all non-essential businesses, which included real estate showings. On this date, our world changed even further.

Buyers, sellers, and the Realtors who work with them are adaptable, and some transactions have continued via virtual showings. Many agents have noted that their buyers are reticent to purchase in this manner. This is logical, as anyone who reviews MLS photos will realize photos are often not truly representative of a properties condition due to enhanced photography, and the allowance (in our MLS at least) of virtual staging. Photographs of detrimental conditions are not usually front and center. Therefore, although there is still activity with some buyers and sellers who need to move, for the moment we are largely on hold.

Where will prices go when the stay at home orders are lifted? To me it is anyone’s guess, although there are factors that we should consider. One factor to consider is that prices show as already flattening by the 4/9/20 data run (not the same period as previously, but only two months and a couple days off, still containing one years’ worth of sales). For example, for all Ann Arbor sales, the median price increase was only $3,000 from $390,000 to $393,000, and condominium units saw a very small decline from $238,000 to $233,000 in this same period. If prices had already started to level even with an extreme shortage of inventory, what will happen when the market unfreezes and buyers and sellers are free to move around again? What happens if the unemployment rate tops 30%? What happens if it only tops 15%? Will interest rates be reduced even further to spur activity? What about property taxes and their effect on affordability? Will buyers reduce their price range so as to be better able to withstand future catastrophes? Will the stock market continue to be mercurial and buyers feel more comfortable having assets in something solid, like real property?

Agents in my market are largely optimistic. The very tight supply compared to heavy demand over the past few years had driven prices higher, but being a numbers person, it does not show in the data that I ran through the MLS as noted above. Granted, the data that I culled from the market included all sales within the district, and different markets within the wider school district have moved at different levels, but overall, this is meaningful information.

Optimism is a good thing; it beats being Eeyore. That said, our market is not immune to declines in pricing, as evidenced by the simple chart shown above.

My crystal ball is broken and I cannot predict the future. If I could, I wouldn’t be writing this particular blog post. The idea however, is we should examine different forces within the market and not only focus on positives or negatives, but take a more balanced approach. As appraisers, we let the market tell us what is happening, and just over two weeks into our States shutdown, it is simply too early to call.

Stay well my friends. Take care of your health, stay home and save lives. Collectively we will come through this, we simply cannot predict where prices will be when it is done. At least I cannot.

Belser Estates and Chelsea Ridge

Description
Belser Estates and Chelsea Ridge are connected to each other through common streets, and tend to function as one neighborhood. The neighborhood is made up of two phases of Belser, plus Chelsea Ridge site condominiums. Belser Estates had 28 sites in the first phase and 46 sites in the second phase. Cook Builders developed Chelsea Ridge to the immediate east which contains an additional 60 sites. There may be additional land to the east but not part of this brief neighborhood description.

The oldest houses I found in the Belser Estates was from 1989, and newest in 1997. The newer houses in the of Chelsea Ridge began around 2002 up through 2005. One newer house in Belser was noted, built in 2015. The housing is a mixture of single-story ranches, colonial style, some contemporary properties and a couple Cape Cods. Chelsea Ridge mainly has colonial style around 2,000-2,500 sqft but with variety.

The northern boundary of the neighborhood is Dexter-Chelsea Road and the Railroad tracks adjacent to it. The railway is active and includes both Amtrak passenger trains, as well as freight trains. The southern boundary is a field south of Darwin, and Meadowview Dr just south of that. To the west is Freer Road, and to the east is undeveloped land which appears to have been slated for an expansion of Chelsea Ridge based on street extensions. This neighborhood is on the far east side of the city of Chelsea, within city limits, and serviced by the municipal water and sewer lines. Schools are proximate with the middle school around a half mile west, and high school about 0.75 miles south. The downtown corridor is less than a one-mile walk.

Changes over time
So, what has happened in this local market over the years? I took information from the Ann Arbor Area Board of Realtors MLS through a map search and laid out the adjusted sales price and adjusted sales price per square foot since 2005. The data is presented in two graphs below. Both show a dip in prices from 2005 through 2010-2012, and then increases since that time. Overall, both are showing higher today than prices from 2005. The earlier top of the market seems to be 2006 related to price per square foot and 2005 on sales price. This does follow what most area agents and appraisers have tracked, that of the market starting a decline in late 2005 locally, although it appears slightly later in this neighborhood based on these sales.

Only MLS sales were tracked as I do not have the ability to pull information on for sale by owner data onto the spreadsheet. Normally most sales do go through the MLS. The most recent sales closed in August and September 2018, at $334,900 and $325,000. Two houses are on the market within the development, both under contract, both have asking prices above that of the recent sales at $349,000 and $349,900. We have to wait and see what they sell for. The fact that houses are under contract with higher asking prices than the recent sales can again indicate an increasing market.

There are indications that our local market is quite active again, including the number of properties under contract in addition to any changes in price (there were two sets of properties in Chelsea Ridge that sold and resold between 2017 and 2018 which indicate an increasing trend in that period but do not necessarily equate to today). Open house activity can give a great view of how active the market is, as do absorption rates. Lack of inventory can cause overbidding when there is simply not enough supply to meet demand. Every market segment can be different, and one market within the same community may have adequate supply and not be experiencing overbidding, while others may exhibit a shortage. With only five MLS sales in Belser and Chelsea Ridge in 2018, it is not showing as a very active market, but with both listings under contract, there is no supply either.

When in need of valuation services, consider contacting your local appraisal expert. Appraisers provide unbiased, independent, and competent researched opinions.

Monthly market snapshot

Mixing up the way I do the monthly report a bit. In addition to the normal information about the absorption rates and where activity is as of a certain date, I have also included a two-year summary of price changes in each area. Hope that you all find this interesting, and as always, if you have questions, reach out to me, either via phone or email.

Without further ado, the monthly inventory in each market is showing from as low as 1.13 months, to as high as 3.56 months depending on the area. The area with the most inventory however, is actually showing as such due to the abundance of new construction exposed as “to be built”. This means the properties are not immediately available. Since I have run this data in the same manner consistently, I am carrying on with including all market exposed properties through the MLS, but Saline is not as saturated as it appears at first blush.

The market overall is undersupplied, with most areas around two months or less. Since this data includes every listing and sale within each school district, for submarket data, it does not apply. It is useful in measuring where activity is, but as always, you have to look at the market segment in which a property operates.

Based on the contract to listing ratios (CTLR on grid), the greatest activity is in Lincoln school district, followed by Ypsilanti and then Ann Arbor. The areas that are showing as leaning towards a buyers’ market are Manchester and Dexter. Saline is tilting towards a balanced market. Chelsea, Whitmore Lake, Lincoln, Milan, Ypsilanti and Ann Arbor are in seller’s market territory again.

It looks like spring may have sprung.

What about changes in price over time? Again, this is larger market data, not specific to any particular submarket section. These are arrayed by school district, and each data point is one-years’ worth of data at a time, moving forward in a monthly manner. This eliminates seasonality and is useful in seeing more nuanced changes. Looking at this information, it is easy to see that Dexter increased, but there is a decline over the past couple of months. Stability in pricing is seen in Chelsea, Saline, Ann Arbor and Ypsilanti based on the trend lines over the last four or so months. Prices have increased across the board in the past two years but also have slowed or even declined in places. Still, in comparison with two years ago, we are increased on the macro market segments.

If I take this information and put it on an easy to read grid and it is easy to see that over a two-year period, most of the markets are in the double-digits in increases, however the past year was not so kind to Manchester, Dexter, Saline and to an extent, Ann Arbor. The increases in these areas were smaller, and in some cases, negative. The largest increases in the past year were found in Milan, Ypsilanti and Whitmore Lake. This makes sense when observing the median prices, which are lower in those areas, with the outlier being Manchester. My take on this is that as some markets have become expensive for the average buyer, they have moved into different, lower priced markets, which are putting pressure on increases in those areas.

I am continuing to observe our market on every appraisal I develop and communicate. Markets can change quite rapidly, and each market will have a number of submarkets within it. All of this information is presented in a broad manner for ease of reading. All information is culled from the Ann Arbor Area Board of Realtors MLS and is assumed accurate.

Westridge of Dexter

Westridge in Dexter

Pass under the historic Dexter Railroad Bridge heading west, and on your right, along the curve towards Pinckney, is Westridge subdivision. Like many developments that took place during the housing boom of the late 1990’s and early 2000’s, this development was a roaring success until the local real estate market started to hit the brakes in 2005. Most houses in the development were built between 2000 and 2006, although there were a handful in 1999 and 2007. The remaining lots started to be sold off to individual builders and new construction began again in 2010. The development splits between these older and newer houses, with the newer houses primarily situated on the northern side of the neighborhood, although there are scattered newer houses throughout. Only a couple vacant sites remain at this writing.

Houses are tract built, but with variety. There is ranch style, colonial, and some transitional houses with first-floor owner’s suites. Many have walkout basements and back to wetlands or wooded areas. Some back to walkways or parks. There are smaller houses, just north of 1,300 sqft, as well as some larger houses closer to 3,000 sqft. The newer houses tend to be higher priced and with modern upgrades as expected.

Westridge has a fortunate location adjacent to the Huron River and attendant park systems. It is along the Border to Border trail, offering easy access to both recreation and to the city center through a well-maintained pathway. This is particularly attractive in that there are no walkways along Island Lake Road, near the Railroad Bridge, making pedestrian traffic potentially life-threatening otherwise. The pathway that connects the subdivision to the downtown core requires only a few blocks walk, and many buyers consider this a particular selling point for this development.

Newer subdivisions appear to have been hit fairly hard during the Great Recession, at least locally. Westridge was no exception. The Ann Arbor Area Board of Realtors, from where my research is gleaned, maintains listings back in time, but only in a robust manner to 2006. In a map search (above) of the development, I found sales back to 2001, but only a limited number. The data that follows is a scatter graph of all sales at their adjusted sales price, over time. Following that, is a yearly chart showing differences in sales prices per year, and at the end is information about current activity.

As is seen in this scatter graph, the market declined to a low point between 2008 and 2009, and current prices are well above the prices seen in 2001-2006 before the decline.

Laying this out in a yearly manner makes this information a bit more readable. The data below shows only median adjusted sales prices and price per sqft for simplicity purposes. Caveat on the data is that between 2001 and 2003 there were only minimal sales retained, and the number of sales started to increase in the MLS in 2004. Nevertheless, this information shows how the market declined over time and how it has recovered and exceeded previous prices. In the median adjusted prices, there is a blip upwards in price in 2005 followed by a decline to 2009. The 2010 price jump relates to size, therefore the next chart that follows shows price per square foot.

Looking at price per square foot the data shows the peak in 2003, declining steadily from 2004 through 2009. In my experience as a local appraiser, this appears more reasonable. I recall, in mid-2006 telling my husband the market had dropped around 10% and I didn’t see it going much lower. Oops.

The median Sales price since 12/5/17 (one year to the date of this writing) was $400,000 and the median asking price $420,000 on a 2,145 sqft house. There are currently two offerings in the development not under contract. The median asking price is $372,450 and a median 2,047 sqft house. Asking price is lower than the previous asking price of the sold properties by 11.32% and median size difference is 4.57%. Therefore, this information shows that prices may be down, as the asking prices are lower still than the difference in size. There are two properties under contract, and their median asking price is $369,900 and size 1,967 sqft. That means the asking price is 11.93% lower and the size is 8.3% lower, still indicating there is a decline potential.

Until we have a bit more data it is hard to call, but as an appraiser this information is meaningful, and I would not be calling the market increasing in spite the recent price increases noted in the charts above. For those of you actively participating in this market, please pay attention to “chatter” from buyers, sellers, agents and appraisers. Who knows exactly what will happen going forward, but there are indications that the market is changing.