Importance of Identifying Trends within Trends / Brexit Thoughts

28 Jun Importance of Identifying Trends within Trends / Brexit Thoughts

With continued upward pressure on prices in many market areas, it is always wise to identify trends within trends. When appraising, I always look at the overall market and as well as the segmented market  of the subject property.  Further, I look at a variety of trend indicators such as median price, average price, price per SF and so on.  To clarify, the median refers to the “center” value of an ordered set of data. The average price is simply adding the sold prices together and dividing the by the number of sales.

For example, recently I completed an appraisal in the market area of Alta Sierra, a semi-rural community in Nevada county. Here are the stats that I discovered.

The  entire county of Nevada county (March-May 2015 to March-May 2016)

• Median price-7.4% increase
• Average price-3.4% increase
• Price per SF-5.8% increase

The market area of Alta Sierra located in Nevada county (March-May 2015 to March-May 2016)

• Median price-12.5% increase
• Average price-3.7% increase
• Price per SF-6.9% increase

Homes 1,200-1,600sf located in Alta Sierra (1March-May 2015 to March-May 2016)

• Median price-11.8% increase
• Average price-14.9% increase
• Price per SF-15% increase

As I digest this data, a few items stand out:

1. While varying, the overall market in general has upward price pressure at this time. While this seems obvious, this is at times not the case. I’ve seen data indicate a county statistically flat with no obvious direction; however a segmented market  to be trending differently, whether upward or downward. Looking at both gives context for the market.
2. The median increase in Alta Sierra is higher than the entire Nevada county as a whole. Further, there is seemingly upward price pressure as the median price has increased in both samples in Alta Sierra and indicates that this area is increasing at this time.
3. The price per SF increase was much higher for the 1,200-1,600sf homes vs. the entire area of Alta Sierra. This could partially be due to the smaller homes are generally at the low end of the market. Given the current market conditions with low rates combined with low inventory, the increase in price will increase this segmented market’s price per SF higher compared to larger homes.

Brexit and the impact on the market:

So the world was seemingly taken by surpise by Brexit, which is the British exit of the European Union.  I do not claim to be an expert on the economic or political impact of this vote and decision; however the global and domestic market reaction was negative to say the least.  Looking ahead, I wonder how this decision could impact the bond market and impact of interest rates. With growing concerns about the global economy alongside Brexit, there are reports that mortgage rates could drop to record lows. This is something to monitor and watch as the summer moves along.

I wish you all a happy 4th of July!

Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use.  This information is NOT intended to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or other potential real estate or non real estate purpose. This appraiser is NOT a qualified home inspector and any tips are for informative purposes only. If you’d like to obtain and order an appraisal for your specific needs, please contact Bryan at 530-878-1688 for more information.