Market analysis challenges in 2012
Before 2008, I was proud of my ability to nail the selling price of a home, often within a few thousand dollars. I would go into a listing appointment with my market analysis prepared and printed, and confidently tell the sellers the exact price range within which their home would sell.
Those days are long over.
Recently I met with a seller of a home in the $600,000 range, and I had a $100,000 range of value based on recent sales. This was an unusual home, on ten acres in the Chapel Hill school system which is extremely rare. Estimating market value for something like this is an art and not a science, and really depends on whether there is a buyer out there who really wants ten acres and when there are no similar properties we have to use dissimilar properties and make adjustments between the sold properties and the subject.
This becomes even more difficult when some of the most similar homes are distressed sales which likely sold lower than market value would suggest.
Today’s news on the housing market is extremely bullish. Today my inbox was full of articles like this one:
The housing sector will likely take incremental steps forward in 2012, though total originations will fall on fewer refinances, according to economists at Fannie Mae.
The second half of the year should outpace the first six months in terms of growth, though fiscal policy and political uncertainty in Washington will likely drive consumer and business activity, the mortgage giant said.
Unlike appraisers who look back to determine market value, real estate agents look forward to determine the likely selling price of a home. In a housing market where there is significant price movement, either upwards or downwards, looking backwards does not provide an accurate picture of the likely selling price.
The general mood does seem to be more positive, and that is certainly true in our office. The phones are ringing, website traffic is up. So the market analyses I do now to assess market value needs to find that sensitive balance point between optimism and reality. The way I attempt to accomplish this is by setting a realistic price expectation based on past market activity, but test the market by reaching a little higher with the listing price. Sometimes this strategy results in necessary price reductions, but I would always rather take a chance than let the past dictate the future.
For every positive article on housing you can find a negative one, and the fact is no one knows for sure what the future will bring. But it’s been my experience that the future is more likely to be bright when you look for the Sun than when you remain in the darkness.
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