Birmingham Appraisal Blog » Market Trends

10 years of sales in the Liberty Park subdivision of Vestavia Hills, Alabama

Tom Horn — Tue, 15 May 2012 19:01:07 +0000

Liberty Park is an upscale subdivision located in the city of Vestavia Hills, Alabama. It is well recognized because of the Statue of Liberty replica that is located at its entrance. The statue was originally made for the Liberty National Life Insurance Company in downtown Birmingham, however in 1989 it was moved to its current location.

Sales prices in the subdivision over the past 10 years have held relatively stable when compared to other neighborhoods in the Birmingham metro area. I took a look at the median sales price trends over the past 10 years recently while working on an assignment in this popular development.

Take a look at this trend chart of the median sales prices.

Keep in mind that this includes all properties within the development, and there is a wide range of home prices and quality of home. At the lower end there are one level garden homes on a slab foundation and at the upper end there are custom built estate homes on acreage tracts. Sold prices range from the lower $200′s to just over $2.8 million dollars.

Each sub market and price range of homes will have its own price characteristics, however the chart above reflects how the entire development’s prices have changed from 2002 to 2012. Do you see the arch in the middle? This appears to be when the median prices were at their highest. Prices increased from 2002 to late 2008 and then they start to take a dip. From late 2008 to the current time prices have declined slightly and there are more in the lower price range, which has resulted in the trend line shown.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

A look at 10 years of unemployment in Shelby County, Alabama

Tom Horn — Mon, 07 May 2012 13:06:02 +0000

An announcer on the radio several days ago stated that interest rate are at their lowest level ever, going back to when they began keeping records. This is very good news for home buyers but it makes me wonder if it will have a significant impact on home sales. Interest rates have been low for quite a while, yet homes sales have still been in a slump and remain at lower than normal levels.

What will it take for home sales to increase? I am not an economic expert but I do know that there are three things that help contribute to a healthy housing market. These are: home prices, interest rates and the unemployment rate. I have wrote extensively on home value trends in the Birmingham, AL area. Property values have been depressed due to the influence of foreclosure sales, which is good for buyers. This has made homes affordable to more people. As I mentioned at the beginning, interest rates are now at an all time low, allowing buyers to purchase more home for lower payment. So with that being said, what else is left? Unemployment is the the last of the three factors that need to be in good shape before the real estate market begins to really take off.

There are good signs for the unemployment rate in Shelby County, AL. If you take a look at the graph of the unemployment rate over the past 10 years you will see that we are at least headed in the right direction, and that is down.

The highest level was around January 2010 when the unemployment rate was approximately 8.0, and as of March of 2012 we were at 5.1%, which is about where we were at in January of 2009. While we are not at the low levels we had in 2007, the current trend is encouraging. What do you think about the downward trend? Do you agree that a low unemployment rate is the last piece of the puzzle for a healthy market? Please leave me a message below and tell me your thoughts.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

So, How IS The Birmingham, Alabama Real Estate Market??

Tom Horn — Mon, 30 Apr 2012 13:44:20 +0000

Funny you ask. I get asked this question a lot and I have my own thoughts, but it’s nice to know that other professionals agree. In addition to experiencing the local Birmingham market from a first hand experience, I read a lot of market data to assist me in my real estate appraisal business.

Local real estate analyst Tom Brander, who helps contribute data to the Alabama Center For Real Estate (ACRE), recently compiled data on what other experts think. Their findings?- you can read the entire article at the above link on Tom’s blog, but I will summarize what the community of real estate professionals feel the summer months will bring. They are confident that the market will improve and sales will be better than last year. The actual performance in the first quarter of this year, no doubt has contributed to the rosy outlook. On a negative note however prices are not expected to improve anytime soon, and the availability of credit does not look good.

I always say you have to take the good news with the bad and find the positive in anything we go through. It took a long time for us to get in the mess we are in, and it will probably take a while to get out of it, but I believe there are positive signs that show we are moving in the right direction. This is not to say that we won’t get sucker punched by the release of a new wave of foreclosures that was recently reported, but we’ll just have to cross that bridge when we get to it, right? What do you think of the local real estate market? Leave me a message below, I would like to hear your thoughts.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

What 5 Years of house sales can tell us about property values in the Highland Lakes subdivison of Shelby County Alabama

Tom Horn — Thu, 19 Apr 2012 13:33:43 +0000

The Highland Lakes subdivision in Shelby County, Alabama is not unlike other neighborhoods around Birmingham. It has also been effected by the slowdown in the real estate market and the downward trend in property values. Over the past 5 years the total number of sales have decreased as well as the number of home sales in the upper price ranges. If you take a look at the chart below you will see what I mean.

Do you see the downward trend in the median sales prices of homes from 2007 to 2012? A look at the median sales price for each of the years shows that in 2007 the median price was approximately $433,000 and each year it has decreased until the last year which was approximately $379,000. This is a decrease of $54,000 in the median price. This supports a previous post of mine analyzing the trend in Shelby County property values over $500,000. You can read that here. Several factors contribute to this decline, including the influence of foreclosures and the decrease in the number of buyers. Buyer confidence has been diminished due in part to the high unemployment rate. People have either lost their job and are unable to buy, or they fear that they may lose their job. I believe when the unemployment rate decreases this will help home sales.

The Birmingham MLS reports that there were 56 sales in the past 12 months. At the current time there are approximately 63 homes for sale in Highland Lakes. This includes existing homes as well as homes under construction. This translates into approximately 31 months of inventory. This seems excessive, however it appears to be caused by slow sales last month (March). The average months of inventory last year was around 10 months. One good thing is that of the 63 homes for sale only 6 are foreclosure listings. This is not considered excessive and their influence should be minimal. Do you live in Highland Lakes or a similar area that has experienced declines in the number of sales and/or prices? Do you see things turning around? Leave me a comment below, I would like to hear from you.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

Then and Now: Comparing Alabama’s Peak Years To The Current Market-Part 2

Tom Horn — Tue, 17 Apr 2012 18:45:37 +0000

In my last post I looked at how the current real estate market in the Birmingham, Alabama area is performing compared to peak years in the past by analyzing the median price and number of sales that have occurred. Data has been taken from reports published by the Alabama Center for Real Estate (ACRE). This post will cover the last two statistics which are days on market and absorption rate.

Chart courtesy of Alabama Center for Real Estate

Days on Market: The days on market statistic can provide valuable information on how the real estate market is performing. A large inventory of homes can result in a buyers market. In this type of market if homes are overpriced they will sit for extended periods of time, until the price is adjusted to reflect supply and demand. If a home is priced too low it will sell fast but the seller may not get as much money for their home. In contrast, if a home is priced too high then it will take a long time to sell. When a home is priced to reflect what is occurring in the market, the days on market will fall within a range that is typical for the area, while at the same time allowing for the highest price to be paid for the home. The chart shows that in February the average days on market was 172, which is very close to what it was in 2002. This is a also the highest average days on market within the 10 year period. It reflects homes which have been on the market for a long period of time, most likely due to being overpriced. When the home is priced more realistically this should come down.

Chart courtesy of Alabama Center for Real Estate

Absorption Rate: I have covered what the absorption rate is, and how it is calculated in my blog post titled “A Look At The Absorption Rate In Pelham, Alabama“. It is a measurement of how long it will take to sell the current inventory of homes given the recent rate of sales. It determines whether the market is a buyers or sellers market, or if it is considered to be in balance. This is important to know because you would not want to overprice a home in a buyers market. Potential buyers would pass your home up in a heartbeat and move on to the next one.

The current statewide absorption rate of 12.4 months indicates a buyers market. If not priced correctly homes can take longer to sell, which actually appears to be happening from the days on market graph. It should be noted that the absorption rate, on a statewide basis, has been decreasing since February 2010, when it was at a high of 16.0 months. This may change soon because it was recently reported that the next wave of foreclosures will be entering the market soon. This will of course increase the level of inventory and absorption rate, unless sales activity increases to offset the increase in inventory.

Are you trying to sell your home? Are you pricing it to the market? If I can help you in any way please give me a call, I look forwarding to speaking with you.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

Then and Now: Comparing Alabama’s Peak Years To The Current Market-Part 1

Tom Horn — Wed, 11 Apr 2012 14:04:47 +0000

As a real estate appraiser in the Birmingham, Alabama market I am very interested in how the housing market is performing. While we still have a long way to go to reach the levels we attained years ago, I do believe 2012 will turn out to be a year that shows positive trends in that direction.

Clients frequently ask me how the market is, and over the past several years I really didn’t have a lot of positive news. I hope my response will change this year. So far in 2012 I am beginning to see positive trends. The Alabama Center For Real Estate (ACRE) publishes great information on housing statistics for the state, so I decided to take a look at their findings and how our current situation compares to the market when it was red hot. The four statistics I decided to look at include: median sales price, total number of sales, days on market, and the absorption rate. I will cover the first two in this post and the last two in my next post.

Chart courtesy of Alabama Center for Real Estate

Median Sales Price: Because real estate appraisers report on home values, and that is tied to price, the median sales price is a statistic I am very interested in. I believe the median sales price is a better statistic than average price because it is not influenced by extremes like the average price is. Over the past 10 years the highest median sale price of $129,317 occurred in February of 2007. As of February of this year (2012) the median sale price was $109,214, which is 15.5% less than the peak. These number reflect the whole state of Alabama, however the Birmingham area has actually showed a 3.5% increase from one year ago. This trend in median sales price is slow in showing increases, which is likely caused by the influence of foreclosure sales in the market. In addition, more stringent credit requirements is affecting the number of potential buyers. With the pool of buyers being reduced sellers have to continue to drop their price until they get an eligible buyer. This will probably be one of the last statistics to show a positive upward trend until the foreclosure inventory has been depleted.

Chart courtesy of Alabama Center for Real Estate

Total Sales: Total sales is a good reflection of activity within the market, however it does not consider other important factors like the aforementioned median sales price or type of sale such as foreclosures and short sales, however it is still a statistic that needs to increase if the market is to return to its peak years. The February sales volume of 2,685 is at about the same level it was in 2002, when 2,640 homes sold. The peak year within this 10 year time frame occurred in February of 2006 when there were 4,266 sales. We are currently at about 63% of our peak year. The state, as well as the Birmingham area is headed in an upward trend since last year, with Birmingham showing a 26.7% increase over February 2011. An increase in sales will help reduce existing inventory, including foreclosures and short sales, which is necessary if we are to return to a healthy market.

Do you study the real estate market in the Birmingham, Alabama area or where you live? What do you see occurring in your market? Leave me a comment below, I would like to hear your take on the state of the market.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

What’s happening to home sellers in the Birmingham, Alabama market?

Tom Horn — Mon, 02 Apr 2012 13:54:23 +0000

I am the biggest proponent of getting an appraisal for home owners wanting to sell. You might say “of course you are, you’re an appraiser”, but guess what?, the word is getting out! I say this because I have performed more “pre-listing” appraisals recently than normal.

I think this is a good sign that homeowners are beginning to realize that if they want to sell, they must be more realistic with what they price their home at. If you look at statistics you will see that when a home that is priced more realistically sells, it sells in a shorter time period. A home that is priced correctly will have a high sale price to list price ratio, meaning that the final sales price was very close to the list price. In addition to that statistic, the percentage of actual sales to listings will be higher. It has been very hard for owners to accept the price at which they must now list their home at because it is much lower than it was years ago and we are not use to this because we have always been told that real estate does not lose its value. They have listed their homes at a higher price only to have to reduce it multiple times to get it sold.

Buyers these days know what other homes are selling for and if they come across a home that is priced too high they will go on to the next one in the neighborhood that is priced more accurately. Declining markets are still prevalent in many areas and if your home is left on the market for a longer period of time buyers see this, and they will perceive you as being desperate, and this will encourages them to make lower offers. In a recent study by RadarLogic they reported that:

“Sales of non distressed properties increased last year, but that increase was accompanied by a decline in prices — lowering the price spread between distressed and non distressed sales, the report said.”

Take a look at this graph that accompanied the article. You will see that while the number of sales increased the prices decreased.

So you are probably asking what this means for you, the average home seller, right? As a real estate appraiser my advice would be to make sure you have your home priced as accurately as possible. This can be done by you, a real estate agent, or an appraiser. I recently wrote an article about “How To Estimate The Value Of Your Home Without Getting An Appraisal”. It will give you tips on pricing your home correctly. You can also hire a Realtor to sell your home, but make sure they know the market you are in and are in tune with prices and what it takes to sell. I know several I would recommend, so give me a call if you need a name. The last option would be to get an appraisal. By doing this you will know what the home is really worth and what the bank will finance so there will be no surprises. The bottom line is that you will have a better chance of selling your home if it is priced competitively for your area rather than on emotion or poor knowledge of the local real estate market.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

What are the best indicators of a recovery for the real estate market?

Tom Horn — Fri, 02 Mar 2012 14:28:14 +0000

In a recent article by the Alabama Center For Real Estate (ACRE) it was reported that January 2012 residential home sales in the state of Alabama were up 17.6% from a year ago (2011). This announcement followed up the news that 2011 saw an increase of 2% over 2010. Great news, right?

Of course any increase is positive, but there are also some other indicators other than number of sales that appraisers look at when they study the market. In addition to sales volume it is important to look at absorption rate, active inventory, months of housing supply, median list price of active listings, days on market, and sales price to list price ratio. That’s a lot to analyze, however by looking at all of these indicators together we can get a good idea of the health of the market. While a look at the larger picture can be helpful, it is at the neighborhood or subdivison level that you can really see obvious trends. Each area and property type will have their own characteristics.

I’ve talked about absorption rate on my “A Look At The Absorption Rate In Pelham, Alabama, Pt. 1″ blog post. By looking at the rate at which homes have sold in the past, and then comparing it to the current number of active listings, you can tell how many months of inventory you have. The longer the months of inventory, the longer it can take to sell your home unless it is priced competitively. An absorption rate from 0-3 months indicates a sellers market and anything over 7 months reflects a buyers market. Historically, anywhere from 4-6 months is in balance. It’s important to remember that these indicators are dependent on each other. For example, the number of current listings and past rate of sales, will determine the months of inventory. Days on market is a measure of how long it took for the home to sell from date of listing to date of contract, and it is affected by supply and demand.

The next set of indicators also work together to give us an idea of what is happening. The median list price of active listings, listing days on market, and sales price to list price ratio mirror market health. If the median list price of active listings is lower than the median sale price of recent sales it tells you that the market is starting to be saturated with homes and sellers are lowering their asking price to meet the increased supply. An increase in days on market shows that demand is decreasing and it is taking longer to sell. The sales price to list price ratio measures the difference between what the home was listed for and what it eventually sold for. I have found that in a healthy market this figure is in the 95-97% range.

This post is not an in depth study of market statistics but rather a brief introduction to what appraisers look at to determine how a market is performing, and if it is on its way to a recovery. What other things do you see as being good indicators of a recovering market? Please leave me a message below, I would like to hear what you have to say.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

An interesting trend in the Birmingham, Alabama real estate market

Tom Horn — Tue, 14 Feb 2012 00:32:34 +0000

I have noticed an interesting trend in the Birmingham, Alabama real estate market. The trend involves the segmentation of the market in various areas, but mainly where foreclosure activity is prevalent. I noticed it most recently in the Centerpoint area of Birmingham. The segments include the following:

foreclosures
“normal sales” and
flip properties

The “normal” sales are being negatively affected in an interesting way, and I will tell you how. There is a larger than typical (I guess that’s relative in today’s market) percentage of foreclosure homes that have sold over the past 12 months. Over the last several years the Birmingham market has consistently had 30-40% of sales be foreclosures or short sales. From February 2011 to February 2012 the Centerpoint market has had approximately 70% of the homes that sold be either foreclosures or short sales. That is an astonishing number, but one that indicates it is ripe for the picking by investors who want to buy, renovate, and flip the property for a profit. It appears that is exactly what they are doing.

Many of the flip properties are being listed and sold for below the market, so they will move quickly. That is where the problem for the “normal” properties comes in. They have to compete with true foreclosures that are being sold by the banks at rock bottom prices and also the flip properties that have been renovated and priced higher, but still not as high as what a “normal” property might be listed at. A homeowner wanting to sell their house will have a hard time competing with this. It seems like the forces of the market will require sellers to price their homes below the flip properties (since they are usually not in as good of condition, unless they have also been renovated recently), which will drive property values down. This phenomenon will probably begin to reverse whenever the percentage of foreclosures have been reduced, but we really don’t know when that will occur since there could be more shadow inventory waiting to come onto the market. Have you seen anything like this in your area? What has been the outcome? Let me here your story by leaving a comment below.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.

Six years of sales activity in the Brook Highland subdivision, Shelby County, Alabama

Tom Horn — Mon, 23 Jan 2012 14:23:02 +0000

I like to share market data I get when I do appraisals in different areas. I’ve included sales from the Brook Highland subdivision in the Inverness area of north Shelby County. The sales are from January 2005 to December 2011. The graph charts the median sales price for each quarter for all seven years. The first graph shows a scatter diagram of all sales in this time period.

Sales prices range from $135,950 to $791,536. As you can see in 2005 and 2006 there was a higher concentration of sales, which I have seen in other areas and is expected as this was before we started seeing the effects of the current housing crisis. In the later years there is definitely more sparse sales. In the next graph I have plotted the median sales prices for each quarter of the year.

The lowest median price is at $221,450 and the highest is at $450,000. You can see that there were some drastic variations around the 4th quarter of 2008 (low), 2nd quarter of 2009 (high), and the 4th quarter of 2010 (low). This could be caused by some foreclosure activity or some sales activity within homes in the lower price brackets. Brook Highland has a variety of homes ranging from small garden homes to larger custom built homes with city and mountain views. At the end of December 2011 there were approximately 17 homes for sales, translating to roughly 5 months worth of inventory. This is the absorption rate and I explained how it is calculated in a previous post. Click here to read about it. Do you see any other trends in these graphs? Let me know in the comments below and if you like this post please share it with your friends.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.