Appraisal Scope

“Bay Area Home Median Falls Below $300,000”

This is the headline from a story in the San Francisco Chronicle on Friday, March 20, 2009, and while it is an accurate statement, it brings to mind why now more than ever, experience in the field of real estate or appraising is really only half of what is needed to accurately value or list property. Equally important is the appraiser or realtor’s knowledge of the particular local market, which varies greatly from neighborhood to neighborhood, and then even within neighborhoods.

Let me give you a couple of examples of what I mean. The article did a pretty good job of describing how the counties in the Bay Area are facing very different levels of falling prices based primarily on the number of bank-owned properties in the area. But I would argue that the “real statistical story only begins to emerge” when you pull each county apart. In Marin, for example, the article stated that transactions tumbled by 26.9% and median sales prices fell 21% (not sure from when to when though) and that the median price of a home in Marin is now $640,000. Take a look at the chart below (values are in the 1000s) and there are a couple of note worthy comments:

• There is almost always a seasonal decline in Q4 and Q1 of every year.
• One of the things that makes appraising so difficult right now is trying to determine how much of the decline is seasonal versus how much of the decline has far reaching implications.
• Median DOM – days no market, though doubling in some quarters, has never hit above 100 days in Marin.

MARIN COUNTY Residential Sales (condos and single family).

Regardless though, I think we see a pretty bleak picture, one where in Quarter 2 of 2007, the median home sales price was at $950,000 and now in the first quarter of 2009 (though there are still a few days left) the median sales price is at $602,000.

Now let’s dig deeper into Marin:

While the same average decrease is apparent in most of the single family markets (many are seeing a 30% decrease from q1 2007 to q1 2009), it is not the case in Tiburon, for example. And it becomes apparent that the $640,000 median sales price quoted in the article does not apply to a majority of the county – as seen when you pull Novato out of the data. But some big questions remain: Will we see our traditional seasonal improvement to median home sale prices with quarters 2 and 3? Or are economic factors too great to provide our seasonal bounce?

San Rafael, also mentioned in the article as an “expensive community” having sales falling to “near record lows,” is an interesting study since the condo market there has dramatically skewed the overall residential data. But that is another story for a different blog.