What Do You Suppose Might Have Caused This?
In my area, the Market Conditions data is basically worthless.
One of the data analysis aspects I do in all reports is research sales trends of comparable properties, using MLS data, and making a graph to show report readers the actual market activity that has occurred over a long real estate cycle…usually 4-5 years back from the Effective Date. I use this to supplement, but not replace, the cruddy Market Conditions form, which poorly accounts for only 12 months of activity. In my area, the Market Conditions data is basically worthless.
I’m sharing this because in the 8 years I’ve been doing this process, using graphs built into a spreadsheet, I’ve never seen this kind of curious trend – which shows a huge gap in time between the two groups of sales.
What do you suppose might have caused this?
This is part of what appraisers can and should do, because the various AVM’s and on-line “what’s my property worth” web sites won’t be able to determine the ‘why’ of the situation – by themselves – without analysis from an actual mirror fogging human.
See below for what occurred to impact sales.
First, these sales are for manufactured homes on 1.5 to 5 acre sites in a rural area, in NW WA State, within 4 mile radius of the subject. But I suspect site-built homes will have a similar trend in this affected area.
Second, while the left group of sales is limited in number, you can see a bit of seasonality in the sale dates. That is typical out here, when sales decline during our winter months.
Third, the right group is actually ‘falling in line’ with the prior increasing value trend of the left group, although I didn’t put the trend line on this graph. Whatever happened has not adversely affected the current property value perception of buyers.
Fourth, I decided to use the right group only for current analysis of the overall trend for that time period (and chosen comps), which actually is increasing at over 10% annually, per the spreadsheet formula.
So why no sales in a 1.5 year period, from early 2014 to mid-2015?
I gave you one clue above. It relates to geographic competency that all appraisers are supposed to possess when doing appraisals.
You may remember the Oso Landslide that occurred in March 2014. A huge side of a hill dislodged, raced down that slope in a mass of mud, rocks and trees, across a major river (damming it until it cut its way through a couple of days later but flooding the wiped-out neighborhood). It killed 43 people, damaged and destroyed 49 residences and other structures, and kept rolling across and blocked the significant two lane highway that connects a smaller city farther east to Interstate 5 to the west. This was one of the most major natural disasters WA has seen, after Mt. St. Helens blew its top.
This event had the effect of significantly impacting sales in the area east of Arlington, WA, where the appraised property is located. The highway was closed for months, and became a dead end road where the slide occurred. One appraiser I know had a home for sale in the affected area ‘this side’ of the slide, but nobody wanted to buy it. It’s been a rental since then.
The bright side to this is sales again picked up in mid-2015, people have decided that buying and living in the area is fine, and property values are continuing to increase. The highway is again open and things appear ‘back to normal.’
The point of this message is to demonstrate how charts and graphs of sales data can visually reveal situations that have occurred, which can help an appraiser research and determine the causation effect of somewhat odd data that is out of the ordinary.
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Like in Evergreen CO. At some point pricing stalled out and took on different scaling with time, in the same period where insurers refused coverage for fire damage. They have a tough time getting fire insurance coverage out there. If you have not spoken to locals, you probably don’t know that about some locations in Evergreen. I heard you can still get a steal of a deal for land in Hawaii. The only catch is you’ll live in an uninsurable lava flood plain. Hey, what’s a little lava between you and a cash cow of real estate value sometime a hundred years from now?
The issues with the MC form don’t have to be rural or mother nature driven, but can be in large suburban areas. I just completed a detached condo assignment where there have been multiple model match sales over the past 12 months (6) within the complex, but based on the subjects newer build date, view, GLA, etc., I have no outside sales over the past 12 months within 3 miles. With thousands upon thousands of residential homes in my search the area, I have only 8 sales in the past 12 months to use in this single MC form. What a joke.