Birmingham Appraisal Blog » Market Trends

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.

Sales activity in Montevallo, Alabama for 2011

Tom Horn — Fri, 13 Jan 2012 13:24:14 +0000

I was in Montevallo, Alabama last week on an appraisal assignment and thought I would share with you the sales data I came up with. Montevallo is in southern Shelby County and is the home of the University Of Montevallo, The American Village, and the new Alabama National Cemetery for Veterans.

The majority of sales activity in 2011 was the sale of existing homes, however there was some new construction. The Birmingham Multiple Listing Service records indicates that only 9 new homes were sold last year. There are currently only 6 new homes for sale. Overall sales activity may seem minimal but it seems to be in line with annual sales over the past 3-4 years.

Take a look at my slideshow of scenes around Montevallo, along with the sales statistics contained it it, and let me know if you have any questions, I would love to help 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.

A Look At The Absorption Rate In Pelham, Alabama, Ballantrae Subdivision-Pt. 2

Tom Horn — Wed, 04 Jan 2012 14:31:19 +0000

We took a look at the entire Pelham, Alabama market with the last blog post I wrote. Today we are going to narrow things down a bit to the subdivision level and even a certain style of home. Of the 222 sales that occurred in Pelham, AL from 12/15/2010 to 12/15/2011, 59 sales occurred in the Ballantrae subdivision. I have written about Ballantrae in the past because even with the downturn in the market there is still some new construction occurring here. The neighborhood offers a variety of home prices and styles and many of the homes are located on the golf course.

By narrowing the search criteria down even more you can see that there is a relatively strong market for garden style slab homes ranging in price from $171,450 to $310,000. This type of home accounted for 46 sales, of which 8 were either short sales or foreclosures. That is approximately 17.4% of total slab home sales within Ballantrae in the past year, well below the overall Birmingham average of 30-40%. At the time of this writing the Birmingham Multiple Listing Service indicated that there were 15 listings of similar slab homes for sale. We can look at these figures and calculate what the absorption rate is for slab homes within the Ballantrae subdivision.

Active + Pending = 15 homes (current inventory)
46 sales / 12 months = 3.83 homes sold per month (rate of sales over last 12 months)
15 / 3.83 = 3.90 months of inventory

This is quite a bit less than the 8.7 months of inventory that we calculated for the entire city of Pelham and shows you that it is important to segment the market when looking at sales and listing statistics. With 3.9 months of inventory the market for slab homes in Ballantrae is on the edge between being balanced and a sellers market. This would be important information to consider when determining an asking price. It would help a seller understand what type of market there was for homes similar to theirs. Take a look at the video below to find out how knowing the absorption rate can help you.

Do you have a question about another area of Pelham that I could help you with?

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 The Absorption Rate In Pelham, Alabama, Pt. 1

Tom Horn — Mon, 02 Jan 2012 17:32:27 +0000

You may have heard the term “Absorptions Rate” before but not really know what it means. The absorption rate is a measure of how long it will take to sell the current inventory of homes in a given market. This market can be on a large scale such as for the entire country, or it can also be calculated on a state, county, city or even on a neighborhood level. In addition, specific property types or house styles may have a different absorption rate. By calculating the absorption rate you can determine what type of market you are in. You can determine if the market is oversupplied, under supplied, or in balance.

Absorption rate is calculated by taking the number of homes that are currently listed for sale, and under contract, and dividing it by the rate of sales for a given period. This figure will tell you how many months of inventory there currently is. Different areas vary but anywhere from 4-6 months is considered a balanced market. Anything less than this would be a sellers market because there is not enough inventory to satisfy demand and anything more than 7 months would be a buyers market because there is too much inventory. As we learned in basic economics, when there is an over supply prices tend to decrease.

Today I wanted to share with you my findings for the Pelham, Alabama area. Remember that submarkets of Pelham, such as individual subdivisions, can and will vary from what we are looking at today, but the method of calculating it is the same. The Birmingham Association of Realtors shows that as of the writing of this article there are 161 conventional single family homes (not including townhouses, manufactured, or condos) for sale. From December 15, 2010 to December 15, 2011 there were 222 homes sold. I am using December 15 as my date of reference to make sure that the sales figures have been entered. If I would have used today’s date, some sales may have been left out because they were not recorded. The method of calculation would be as follows:

Active + Pending = 161 homes (current inventory)
222 sales / 12 months = 18.5 homes sold per month (rate of sales over last 12 months)
161 / 18.5 = 8.70 months of inventory

As you can see, Pelham as a city, is experiencing an oversupply of homes because if no more homes are added to the inventory it will take approximately 9 months to sell every one of them. As noted previously, anything over 6-7 months is considered an oversupply. Appraisers consider this statistic when looking a the supply and demand in an area, especially if the appraisal is being performed to set an asking price. If there is an oversupply then it would be logical to price it lower to compete with the other homes. If there is a shortage of homes on the market then the seller has more leverage when asking a higher price.

Of course there are other things to consider when determining a markets condition. Things such as specific property features, condition, location, and price will determine how long it takes to sell a home. Do you know what the “Absorption Rate” is for your subdivision or neighborhood? If you need help determining a selling price for your property give me a call I would like to speak with you. Next post I will narrow our analysis down to the subdivision level and look at one subdivision in Pelham that has shown strong sales in 2011.

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 The Market For Lake Front Homes In Shelby County, Alabama in 2011

Tom Horn — Fri, 23 Dec 2011 21:05:32 +0000

I recently finished an appraisal assignment on a lake front home in Shelby, Alabama and thought I would share with you my findings. As in other sectors of the Birmingham, AL area real estate market, lake front home have experienced a decrease in sales volume. Check out the numbers below going back to 2005.

As you can see, from the 6 year period being looked at, the sales volume peaked in 2006 and then started declining. Over the past four years it has fluctuated in the 10-15 unit range. This is not unusual considering the fact that overall sales volume has been down, and since many of these homes are vacation get aways, buyers have not been as willing to purchase these homes with the uncertainty of the economy and job situation. Take a look at sales prices on these lake front homes in the chart below.

There does not appear to be a significant declining trend in prices but we do see less sales in the more recent years, which we saw in the previous chart as well. So it looks like while there has been a decline in sales volume there has not been too much of a drop in sales prices. At the current time there are approximately 26 lake front homes for sale in the Birmingham MLS, ranging in price from $148,000 to $649,900. At the current rate of sales this creates an oversupply of inventory, approximately 20 months worth. This oversupply is tied to the number of homes for sale as well as the rate at which these homes have been selling over the past 12 months. What do you think about these statistics?

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.

Assessing The Health Of The Birmingham, AL Real Estate Market-Foreclosure Trends

Tom Horn — Fri, 16 Dec 2011 14:43:25 +0000

Today I thought I would take a look at one of the key elements in assessing the health of the Birmingham, AL real estate market. There are different key indicators including number of sales, change in mean and average sales price, and number of active listings (inventory) to name a few, but today I decided to look at distressed sales, ie: short sales and foreclosures. In a future post I will look at some of the other statistics.

Distressed sales, which include foreclosures and short sales, have had a tremendous impact on property values not only in the Birmingham, AL market, but the entire nation. As I have noted before, our area has not been as hard hit as others. These types of sales have not only caused the average and median sales price to decrease from a statistical perspective but they have also affected the actual sales price of “normal” sales in the market. Due to the sheer number of these types of sales, and the necessity of using them in market value appraisals, they have had a detrimental affect on the sales price of non distressed properties. Take a look at the statistical data provided by the Birmingham, AL Multiple Listing Service.

Click to Enlarge

Since January of 2009 distressed sales have accounted anywhere from 25% to 45% of total sales. The trend from 2009 to 2011 has generally been similar for each year, and reflect normal month to month fluctuations in overall sales, however in 2010 there was an unusual spike in percentage of foreclosure sales in July at the rate of 38% of total sales. This could have been some kind of carry over from the first-time home buyer tax credit or a release of some shadow inventory. Generally speaking though, the percentage of foreclosure sales declined from January of 2009 when it was 45% and has leveled out (not considering typical fluctuations) at between 30-35%. While this is not as bad as other areas of the country it does take its toll on the local Birmingham market. Until the number of foreclosures decrease significantly they will continue to negatively affect the non-distressed sales because they provide competition to them. This is only the case for the foreclosures that are in similar condition and appeal to non-foreclosure homes. What do you think about the figures from the table?

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.

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Birmingham, Alabama Home Sales-Most Expensive Home Sale YTD-November 2011

Tom Horn — Tue, 22 Nov 2011 04:01:13 +0000

It’s been a while since I looked at the most expensive home sale in the Birmingham, Alabama area. I took a break from this subject for a while but then discovered this was a pretty popular search topic for readers of my blog, so I decided to revisit the “most expensive home sale” and see what has happened.

The Birmingham area is made up of many great communities, many of the “most expensive” homes came from the Mountain Brook area, which is an upscale suburb in Birmingham. However in 2011 the most expensive home sale as of November is located in the town of Wilsonville in Shelby County and it sold for $3,224,681. The property consists of a home on a 12 acre island on Lay Lake. This is a very unique property that was part of a larger 50 acre horse farm that was divided up to be sold. Wilsonville, AL is in southeastern Shelby County and is mostly rural property with the Coosa River running south through it. The property was sold by Pam Ausley with RE/MAX.

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.

Signs of Real Estate Life In Vestavia Hills, Alabama-Miller Hill Subdivision

Tom Horn — Fri, 04 Nov 2011 15:23:52 +0000

I was doing some appraisal work in Vestavia Hills, Alabama this past week and ran across the Miller Hill Subdivision. This is a newer subdivision with new construction. I’ve reported in the past about the slow market for new construction, so when I see it I like to let people know the good news.

It seems like a lot of the new construction is being built by the larger companies who have been able to weather the bad economic storm. That is the case with the Miller Hill subdivision which is being developed by Signature Homes. A lot of the smaller companies have been forced out of business which is sad. I believe small businesses are the back bone of the country and I hope that as the country starts to recover the smaller companies will return to the market. Here are some pictures of the neighborhood.

[Show as slideshow]

New home construction appraisals are a challenge in today’s market. There are several reasons for this. The first has to do with the limited number of new construction sales and the other has to do with certain mortgage underwriter guidelines. Appraisers are required to use comparables from other developments, and from other builders. This helps to give a more complete picture of whats happening in the market. If you just use sales from the subdivision the home is being built in, and from the same builder, it can give you an inaccurate view of the market. If you’re an appraiser are you having problems with this issue? Are you seeing any new construction in your area?

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.

Birmingham, AL: Greystone Market Update-October 2011

Tom Horn — Wed, 19 Oct 2011 17:39:10 +0000

So I thought I would share with you my latest findings for the Greystone Development in Birmingham, AL. Greystone is located in the Hoover area of Birmingham, in north Shelby county. Over the past 12 months the mean sales price of all homes in this subdivision has varied due to the type of homes that have sold, but the trend line in values has been rather steady. There is a wide range of home prices within Greystone as homes vary from small garden homes on slab foundations to large custom built luxury homes with basements on acreage lots.

This variety of homes results in extreme differences between the low sales price to the high sales price. See the graph below reflecting the mean sales price of homes for each month over the past year.

Over the past 12 months there have been approximately 137 homes sold with an average inventory of 9.81 months, which is considered an oversupply. The average days on market is 136, or roughly 4.5 months. The average sales price to list price ratio is 93.03%, which is low as it typically runs around 96-97%. This could be due to the need to drop the list price because the home has not sold. This reinforces the fact that if a home is priced right it will sell. It is critically important to price the home accurately at the beginning so that it sells within a reasonable time.

This information has been obtained from the Birmingham MLS. Are you familiar with the Greystone market? What do you see happening?

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.

The Good, The Bad, and The Ugly in Shelby County Home Sales

Tom Horn — Thu, 04 Aug 2011 02:55:21 +0000

You may wonder what I am referring to when I state “The Good, The Bad, and The Ugly in Shelby County Home Sales”. I am referring to new home sales, foreclosure sales, and the percentage of foreclosures compared to total sales activity in the Shelby County, Alabama area. By looking at these figures we can get a better idea of how the market is performing in this area.

New Home Sales (The Good)

From January 1, 2011 to June 30, 2011 there have been approximately 1,119 single family home sales in Shelby County. Of these sales there were 143 new construction homes, representing 13% of the total home sales. The majority of the new home sales were in the following subdivisions: Waters Edge at Bent River (16 sales), The Enclave (16 sales), and Holland Lakes (14 sales). The homes range in sales price from $99,900 to $273,515. These are more modestly priced homes, which you might expect in today’s subdued market, however it is still good news that there is new construction activity.

Foreclosure Sales (The Bad)

Of the aforementioned 1,119 sales in Shelby County, approximately 353 were foreclosure sales. Prices range from $6,100 to $1,237,500. This type of activity is expected to continue into the foreseeable future. I have written before about shadow inventory. In my my blog post titled “Shadow Inventory-What It Is And How It Affects You“, I reported that the Wall Street Journal predicted it would take close to 9 years to sell off this inventory. They have revised there numbers since that article to a shorter period to sell off these homes, however more of the homes are still entering the market and continue to affect sales prices.

Property Values (The Ugly)

The ugly part of this article has to do with the overall affect of the market on property values. The 353 foreclosure sales mentioned above account for 32% of all sales. The average and mean sales price of foreclosures are significantly less than that of traditional sales and the foreclosures have continued to have a negative impact on the “normal” sales. One of the questions I get asked the most is why do the foreclosures have to be considered. I tell clients that it is because the foreclosures account for such a large part of the market they have to be considered. Not all areas are the same though, some areas have less of this type of activity. It has to be analyzed on a case by case basis. Your area may be different.

Conclusion

While there is some bad news I believe that we also have to look at whatever positive signs we can find. The Birmingham Association of Realtors reports that the average sale price of a foreclosure in the overall Birmingham market has increased. Whatever the case, it seems the journey back will be slow rather than quick.

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.