Birmingham Appraisal Blog » Tom Horn

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.

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.

I’m participating in a Birmingham, AL home selling seminar this month

Tom Horn — Fri, 06 Apr 2012 13:08:25 +0000

I just wanted to share with you that I have been asked to participate in a home selling seminar this month in the Birmingham, AL area. Terry Crutchfield with RE/Max Advantage is putting it on and has asked me to talk about recent market trends in the Birmingham, AL area and the latest in appraisal related issues. TJC Mortgage will also be there to talk about financing. It will be held on April 15th, between the hours of 4:00-5:30 pm, at the Gravlee Fitness facility in the Mount Laurel community.

View Larger Map

Are you going to be selling soon? If you are, I hope you will come by and join us. There will be lots of good information. If you have any questions please give me a call. Hope to see you there.

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 the value of a pool in my neighborhood?

Tom Horn — Wed, 04 Apr 2012 13:03:23 +0000

This is a question you may have asked yourself at some point. Have you ever dreamed of having one built but don’t know it’s value in your area? Every neighborhood is different, and some areas will give you a bigger return on your investment than others. Swimming pools are always used by appraisers as examples of amenities where cost does not always equal value.

Because every area is different, and the value of a pool varies, I don’t plan on telling you exactly how much a pool will add to the value of your home if you decide to install one. I do want to give you an idea of how the market (other buyers) may perceive it.

Take a look at the pictures below. The first picture is from a neighborhood that has only two pools, and they’re above ground pools at that.

The second picture is from another neighborhood that has 10 in-ground pools. Which neighborhood do you think will give you a better return on your investment? The fact that there are so many pools in the second neighborhood should give us a pretty good indication that homeowners here desire them and will most likely pay more for them. If you build an in-ground pool in the first neighborhood you may not get as much of a return on your investment because pools are not expected or possibly desired here as much as they are in the other neighborhood. When a feature of a home is popular, buyers are willing to pay more for it. So if you added a pool to homes in both of these neighbhorhoods you might expect to get more money for the pool in the second neighbhorhood.

What I have shared with you here is not the be all and end all of determining a pools value. It is a simple tip on a way for you to gauge the “popularity” of swimming pools where you live so that you can make a better informed home improvement decision . Do you have an interesting story about building a pool at your home? Leave me a comment below, I’d like to year 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.

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.

10 reasons NOT to get a pre-listing appraisal

Tom Horn — Thu, 09 Feb 2012 01:48:33 +0000

1. It costs too much money- Really? If you think about the fact that by pricing the home correctly you could cut the marketing time down and reduce marketing costs, this becomes a no brainer. In addition, the modest cost would probably not exceed future price reductions that you may need because it was priced too high to begin with.

2. I want to test the market first- Some people think that they can “test” the market to see if the their estimate of value will be accepted but this could lead to longer marketing time and multiple price reductions.

3. My Realtor can come up with a list price- This is true, and there are many good Realtors that know the market, however when your home is in a an area where sales activity has been minimal, or the agent is not familiar with the market, then an appraisal can give you a more educated estimate of value that reflects current market activity.

4. I can use the tax assessed value to price my home- Assessment values set by the county that you live in are not arrived at with the same methods as an independent appraiser would use. They are done on a larger scale and do not take into consideration special features of your home. They may even be excluding newly finished areas such as basements.

5. I can give potential buyers the square footage that the county has- Buyers like to know how big a house is so that they can determine if their furniture will fit in the house. An appraisal will give accurate square footage (and a floor plans sketch) so that you can let them know exactly how big the house is.

6. I can price it for the same amount that my neighbor did who sold his home recently- I ran into a homeowner who tried this recently. What he didn’t know was that the neighbor told him the wrong price. His home actually sold for less than what he said. My client tried for months but could not sell his home because it was overpriced. He got an appraisal and we found out the home sold for a lesser amount. After my client readjusted his price, the home sold quickly.

7. I never had to do this before, why do I need to now?- We live in an unprecedented time. Who ever thought that real estate values would go down? There are more foreclosures on the market now that WILL be competing with your home. They are in better shape than they use to be and are being considered by potential buyers. An appraisal will consider both normal and foreclosures to arrive at a more accurate value estimate. If these are not considered then you could over price your home which will result in a longer marketing time and more future price reductions.

8. I know how much money I’ve put into my house, I can go by that- Cost has never equated to market value, and even more so in today’s market. While construction and renovation costs have increased, property values in many areas have decreased. Because of this you cannot assume that all of the money you invest in your home will be returned when you go to sell. Again, a pre-listing appraisal will give you a realistic estimate of what you can expect to get for your home in today’s market considering its current condition.

9. I can list it for an amount similar to what my insurance company has it insured for- For reasons similar to #8, insurance value does not equal market value. The insurance company insures your home for an amount that would be required to rebuild the home. This does not factor in depreciation and general market forces.

10. I’ll use the value that the appraiser came up with last year when I refinanced- With today’s ever changing market even an appraisal done last year can be invalid. Markets are changing daily and if you use an appraisal from last year the value may be inflated in this years market, which can result in longer days on market, price reductions and other items I’ve already mentioned. If it is in an area that is starting to rebound then the value could be too low. An appraisal done today is more accurate than a year ago.

As you can see, there are many reason not to get a pre-listing appraisal, but they all lead to the same results: incorrectly pricing your home for sale so that it takes longer, costs more, and results in unnecessary price reductions. By making a modest investment upfront you can increase your chances of a successful sale experience.

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.

How Shelby County, AL homeowners can find useful property information online

Tom Horn — Mon, 06 Feb 2012 14:46:32 +0000

I would like to share with homeowners in Shelby County, Alabama how they can find useful property information online. Have you ever wanted to find out exactly how big your lot is? Ever wondered where your house sits on your lot? How about finding out what school system the house you want to buy is in? These are all questions you can find the answers to by going to the Shelby County, Alabama website here- www.shelbyal.com. Take a look at the video below and see what type of information you can get.

Were you able to find any useful information? Do you know of any other websites where homeowners can get helpful information for free?

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.

Can I use the tax assessment on my house to set a list price?

Tom Horn — Fri, 03 Feb 2012 03:09:30 +0000

I was asked this question the other day by a reader of my blog and I thought I would share it with you in case you had the same question. This person was going to list their home for sale and they wanted to know if they could use their tax assessment to come up with an asking price.

Tax assessments are not a good source of information to use when you are trying to come up with a list price. County tax assessors use different methodology when they assess your property because of the shear number of appraisals that they have to do. They use mass appraisal methods which does not take into consideration special features and updates of your home. In addition, the county sometimes have incorrect information regarding your homes square footage. If this is the case then the price per square foot that the county uses will be multiplied by the wrong living area, and this will cause the value of your home to be incorrect.

Something else that may cause the value to be off is the exclusion of recent improvements to your home. If the county information does not reflect recent improvements, for example if you finish off your basement into a recreation room or something similar, then the assessed value will be lower than it should. The only reliable way to get the correct square footage, and eventually the correct value, is to have it measured by an appraiser. The appraiser takes into consideration recent renovations and updates and considers the quality of construction of the home as well. Only by considering all of the features of the home, it’s correct square footage, and condition can you get a true estimate of its value. Have you compared the information the county has on your home with a recent appraisal? Was it correct? 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.

Appraising In The Aftermath Of A Tornado-Birmingham, Alabama

Tom Horn — Tue, 31 Jan 2012 03:35:57 +0000

How do you appraise a home that has been destroyed in a tornado? That is the question I got from a friend recently after I told him I had gotten some assignments in the storm devastated areas of Birmingham, Alabama. I thought that since he was curious about this that others may be also. I hope this post can provide some helpful information to those with questions about how an appraiser might value a home after it is destroyed.

This past week the Birmingham, Alabama area experienced its second major tornado in less than 12 months. The first storm occurred last year on April 27, 2011, and on Monday of last week another major tornado hit in the Pinson, Clay, and Trussville areas of metro Birmingham. When disasters like this occur, insurance companies must determine the property losses suffered by their customers. Appraisers are often hired to estimate the market value of the home just prior to the loss. Because the effective date of the appraisal is made before the day the appraiser actually looked at the property this is called a “retrospective appraisal”. The appraisal is based on the condition the home was in before the storm occurred.

The appraisers major task is collecting information about the house from an on site inspection as well as from speaking with the owner to determine the condition of the property. Recent updates or renovations are taken into consideration and sometimes pictures are provided that shows what features the home had as well as showing the quality and materials of construction.

After all of the physical characteristics of the home have been determined the appraiser can then go about finding comparable sales that match the property as close as possible. Sometimes a long period of time may have passed between the loss and the day the appraiser looks at the property, but comparables must have sold before the date of value (or loss). Other than recreating the physical characteristics and condition of the home the assignment is rather straight forward and similar to a normal appraisal. If I can help answer any other questions you may have, please let me know. Have you ever experienced the loss of your home in disaster? Tell me about your experience.

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.