In a previous post I mentioned how an appraiser analyzes a market. Our local real estate board provides monthly statistical reports at www.nefar.com. The reports are found by clicking Market Stats on the home page and then picking a report from the menu. They are useful for a macro understanding of a market, but include a large and broad data set, so they are less useful when trying to drill down to a smaller market segment.
A recent analysis for Fleming Island Plantation (FIP) is used to illustrate how data selection can change the results of a trend analysis. It may not change the direction (up/down) but can impact absorption, average sale price, etc.
A recent MLS search of FIP activity west of US 17 found 107 closed sales over a 12-month period. The chart below shows the average sale price and average price per square foot (SF) for all sales in column one. MLS was used to identify only attached homes (townhouses) and found 36 (33.6%) of the sales met this criteria. The average sale price and price per SF is in column two. Column three shows the average for 63 (58.9%) of existing detached sales (re-sales) in FIP over the last year and column four represents the detached new construction over the last year. There were only eight closed sales identified as new construction, but seven of those closed within the last 90 days.
The chart helps illustrate the importance of understanding the various market segments within a larger market. For instance, if I am appraising a detached home within FIP and I only run a search that gives me column one findings, then I could underestimate the current market trends for my specific market segment. Column one would overestimate the trend if my subject was a townhouse.
This is only an important first step, because we still need to understand how distressed activity impacts the market. I will address that topic in my next post.