I subscribe to and read an email newsletter from Laurie Karnes, a local appraiser from Land For Sale, Inc. She chimes in on interesting market-related issues from time to time and she wrote something last week that nicely underscored a point we try to make all the time around here: all real estate is local.
From the newsletter, reprinted with her permission:
I recently completed an appraisal of a large multi-product townhome development in a second ring suburb that 's doing OK. In the traditional 2 story townhome product there were a lot of sales, especially at the under $200,000 price point. But then the market for the $500,000+ rambler townhome empty nester product was dead. In fact, I had to go to a neighboring city to find any sales at all and those sales were around $350,000.
Based on this appraisal in this one community I came to these conclusions about the empty nester buyer:
*During the earlier part of the decade both their home equity and stock funds soared. So they could sell their big 2 story and make a lateral or downward price move and upgrade on amenities.
*With declining home and stock values, the empty nesters choosing to move are no longer wanting to pay for the high amenity homes.
*$350,000 is the cut off point because that is where the jumbo mortgages kicks in at higher rates.
My hypothesis was that the $350,000+ townhome market would be a declining market share relative to the $250,000-$350,000 townhome market. Data proved me wrong on this one when I studied the whole region. The total number of sales of new construction $250,000+ townhome market is shrinking. However, the percentage of the $350,000+ units relative to the the total $250,000+ market has stayed steady from the year 2006 till today at around 34%.
This quick study also proves in important point: real estate is extremely local. My conclusion from the one community did not hold true for the Twin Cities region. Conversely, if I had done the regional study first and applied it to my appraisal subject I would have drawn inaccurate conclusions. I just hate those appraisals that start out with boiler plate data about “the region”-- statements like these are in insult to the trees that sacrificed their lives for those reports.
The price movements of a particular property or small group of properties is not ever going to perfectly match the movements of the region as a whole. Just like we rail against using national housing statistics as a barometer of your house's worth, we should caution against using metrowide numbers OR city-level numbers like those found in "The 100+."
In the end, it really does take a close, hyper-detailed inspection of individual comparable properties to determine fair market value of a home. That's the kind of work that our stats can never truly provide. What we can offer is a snapshot of trends, but it still takes detective work from realtors and appraisers to get the true(st) answers.
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