Bracketing

🌟 Appraisers use bracketing to select comps with features and characteristics that are both inferior and superior to those of the subject property. 🌟
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🏆 The goal is to attempt to bracket all features that require adjustments. Features may include items such as condition, lot size, living area, location, view, or amenities such a pool or garage.
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🎯💯 In a perfect world, each property would indicate the same value after all adjustments are made. But…real estate is not perfect, and a range of adjusted values is typically formed.
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👨‍💼 Most lenders require the opinion of value to be bracketed by the sales prices/adjusted sales prices of the comparables.
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Bracketing (per FHA)
Definition: Bracketing refers to selecting comparable properties with features that are superior to and inferior to the subject features.
Standard: Comparable properties must be selected based on the principle of substitution, and the analysis will reveal the relevance of that data. Comparable properties should not be chosen only because their prices bracket a desired or estimated value.
Required Analysis and Reporting: In analyzing the comparable pool to determine the best comparable sales to display and compare in the adjustment grid, the Appraiser must use Bracketing techniques when possible and appropriate.
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Bracketing (per the Dictionary of Real Estate Appraisal, 7th Edition)
  • In a quantitative analysis, a process in which an appraiser chooses comparable sales or listings that display both superior and inferior elements of comparison to the subject property.
  • A process in which an appraiser determines a probable range of values for a property by applying qualitative techniques of comparative analysis to a group of comparable sales. The array of comparable sales may be divided into 3 groups – those superior to the subject property, those similar to the subject property, and those inferior to the subject property. The adjusted sale prices reflected by the sales requiring downward adjustment and those requiring upward adjustment refine the probable range of values for the subject property and identify a value bracket in which the final value opinion will fall.

Zillow, Trulia, Realtor.com….Why would you even need an Appraiser?!?

Home valuation tools like these simply use algorithms and generic data to “guess” your home’s value.

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Automated systems do a poor job of valuing qualities and characteristics that are intangible. Fresh paint, remodeling efforts, quality building materials, etc. are most likely not considered.   On the flip side, structural issues, deferred maintenance, and other worrisome issues won’t be reflected.

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In fact, Zillow exited the home-selling business in 2021 after citing their own issues accurately predicting home prices. 🤔 https://www.entrepreneur.com/article/395528

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Check out this article for more insight on the topic: https://www.fool.com/the-ascent/mortgages/articles/why-online-home-valuations-are-often-wrong/

Saint Martin Parish Market Update

The real estate market is constantly changing.  If you are thinking about listing your property for sale, purchasing a property, or going through a divorce/estate settlement, it is important to have the most up-to-date information.  Here are a few graphs and charts showing how the Saint Martin Parish real estate market has been performing (Look at the difference between 2020 and 2021!!!!).

New Saint Martin Parish Real Estate Market Update. Click the link to interactive analysis. https://public.tableau.com/views/St_MartinParishTrendsFeburary2022/Story1?:language=en-US&publish=yes&:display_count=n&:origin=viz_share_link

#AcadianaAppraisals #RealEstate #Appraiser #MarketUpdate #MarketExpert

Lafayette Parish Market Update

It’s time for the Lafayette Parish Market Update.  It is important to know the analysis is only for Lafayette Parish and only includes detached single-unit properties.  We will analyze the change in sales volume and the change for the median, average, and average price per square foot.  We will also give some insight around the drivers of some of this change and some of the areas of caution.

Sales Volume:

The first chart shows the sales volume by month. The black bars represent the months of May.  For May 2021, there’s been a 68% increase in sales volume for this month compared to May 2020.  Lock down was in place during parts of May last year, but even compared to previous years, sales are up significantly.

The second chart shows the year-to-date sales volume.  For January through May, there has been a 42% increase in sales as compared to both 2019 and 2020!!!

Year-Over-Year Data:

The next chart details the median price, average price, and average price per square foot.  All three metrics are reflecting a favorable change for the past 12 months as compared to the previous 12-month period.  It is important to note the average living area has increased by 2.8% over this time period.  In a stable market with all else equal, we would expect the median and average sales price to increase with an increase to the average living area.  The living area is one of the most influential characteristics when it comes to value, but it is not typically a one-for-one increase, though.  There are other factors also contributing to the increase in prices.

The chart also highlights the significant increase in the number of closed sales and the decrease in average days on the market.  The changes are even more significant than when we last looked at the rolling trends in March.  The average days on the market for the past 12 months have fallen to about 68 days, and we expect to see this continuing to decline.  During the month of May 2021, the average was only 37 days on the market.

The chart below highlights the trend for the median sales price, average sales price, and average price per square foot.  This chart shows you how the metrics are increasing over time.  There appeared to be a slight dip in the sales prices during December 2019 and January 2021, but there has been a significant climb since that time.

Change In Percentage Of Sales In Each Price Range:

The table below shows the percentage of sales in each price range.  The price ranges are on the left side of the chart.  The percentage of sales in each price range is tracked over the last eight years.  In 2021, there has been some shift.  Market share has decreased in the two lower price ranges, while the $500,000 to $1,000,000 price range has increased its market share slightly.  This movement has also reflected in some of the changes highlighted in the rolling 12 –month comparison table.

There are a couple of items real estate professionals should keep in mind when reviewing data on a macro level for the entire parish:

  1. The data includes ALL sales in the Parish. This includes properties that sold over a million dollars and properties that sold for under $20,000.  If you are trying to value a property, it is IMPORTANT to look at the market segment which includes only properties that are similar to your subject property and that would attract the same pool of buyers.  The various market segments within Lafayette Parish can indicate different trends.  To rely only on this data and apply it to every property in Lafayette Parish is simply WRONG!!!
  2. There are several factors other than just supply and demand that have caused the median and average sales prices to increase. First, data indicates the average size of the living area has increased over time.  We expect the sales prices to increase as the living area increases even in a stable market where the supply and demand forces are not strong.  Second, there appears to be a general shift to higher-end properties.  Factors such as interest rates, the economy, and the job market must all be taken into consideration.

Conclusion:

While values have increased for our market area, it is important to understand the data that you are looking at before making a blanket statement about the change.  It is incredibly important to look at the market segment when determining how values have changed for the property that you are trying to value.

If you have any questions, please feel free to reach out to me.  You can contact me by email at AcadianaAppraisals@gmail.com.  You can also call or text at 337-714-8378.  If you are a real estate professional and would like to join our private Facebook group, look for us at “Ask the Acadiana Appraiser”.

 

Lafayette Parish Market Update!

Takeaways:

•The market is rebounding after the initial slow down

•The number of new pending sales is similar to pre-pandemic numbers

•New closed sales are still down, but this should change in the weeks to come

•The median sales price is improving year over year

•Year to date, we have more sales than this time last year

Daily Trends in Lafayette Parish

Published 3/30/2020

  • New and pending listings are starting to decline
  • The number of canceled listings has increased slightly
  • The number of closed sales is stable; however, this is expected since it typically takes 30-45 days for a property to close after it has gone under contract

Covid-19 has caused a lot of disruptions in the Acadiana market area.  Lots of individuals have lost their jobs due to businesses having to temporarily shut their doors.  Other individuals who have not lost their job are being told to work from home.  Interest rates have been jumping up and down over the last couple of weeks, and the price of oil had dropped to its lowest price in two decades.  There is lots of uncertainty in the air.  With all of this going on, how has the real estate market been affected over the past 4-8 weeks? Let’s take a look at the daily trends over the last two months in Lafayette Parish.

With people losing their jobs, oil prices decreasing, interest rates fluctuating, and a global pandemic, what has been the effect on the single-family housing market area in Lafayette Parish?   Let’s look at the daily trends in Lafayette Parish in several charts that track new listings, closed sales, pending listings, withdrawn listings, and canceled listings over the last two months.  Two dates are highlighted in each chart, March 12th and March 23rd.  The date of 03/12/2020 is the day that most major sports put their seasons on hold.  In my opinion, this is the day where coverage of the coronavirus really took off. The next date, 03/23/2020, is the day that Governor Edwards announced that the state of Louisiana would have a stay in place order effective the next day at 5:00 pm.  The charts show the daily figures for the metrics below.

Daily New Listings:

The first chart shows the number of new listings on a daily basis for the last two months.

The chart is showing that there has been a slowdown in new listings.  The peak for new listings in the last two months was on 2/26/2020; however, there has been a downward trend since then.  In fact, over the past seven days, there have been only 49 new listings. This is a 36% decrease from the prior week of 76 new listings and a 47% decrease from the week before that of 92 new listings.  There is an obvious decline in new listings over the past week which is when the governor’s order was announced.

Daily Pending Listings:

The chart below shows the number of new pending listings on a daily basis for the last two months.

This chart shows an obvious decline in the number of pending listings as well.  In the weeks prior to the day when most of the major sporting events got suspended, there were several spikes in pending listings.  We have not seen spikes like those since the media coverage has increased for Covid-19.

Daily Withdrawn Listings:

The chart below shows the number of withdrawn listings on a daily basis for the last two months.

This metric has been relatively stable over this time period.  On 03/09/2020, there was a spike; however, this only amounted to three withdrawn listings in one day. 

Daily Canceled Listings:

The chart below shows the number of canceled listings on a daily basis for the last two months.

This chart shows a slight increase in canceled listings over this time period.  It is not a significant increase in canceled listings, but it is something that we need to keep an eye on.

Daily Closed Sales:

The chart below shows the number of closed sales on a daily basis for the last two months.

The chart is showing that there has not been much of a change in the number of closed sales over this time period, which is expected.  It takes approximately 30-45 days for a sale to close after it goes under contract.  So while we started to see an impact on the number of new listings, new pending listings, and canceled listings approximately 30 days ago, we probably won’t see a change in the number of closed sales for another week or two. 

Another metric that will be worth keeping an eye on in the future is the sales to list price ratio.  With fewer potential buyers out there due to people losing their jobs, oil prices dropping, and the uncertainty with the coronavirus, we need to watch to see how much properties are selling for versus what they were listed for.  This could be an indicator of a declining market if the ratio starts to decrease.

Conclusion:

I will continue to watch the daily trends in Lafayette Parish as time goes on.  With all that is happening, it would not be a big surprise to see things slow down even more.  It is still very early on, so it is important to keep a close watch to see which way the market is moving.  As time goes on and more data comes in, I will start observing the market on a weekly basis.  Most professionals in the Lafayette market area would have told you that the market was HOT 30 days ago.  Now, things have slowed down due to a number of different reasons.  I’m interested to hear what you have to say.  What are your thoughts on the Lafayette real estate market?  Realtors and Mortgage Lenders, have you seen a slowdown?  Buyers and sellers, are you more hesitant to take action right now? 

If you have any questions, please reach out to me at Lduple4@gmail.com

*A daily hot sheet was run in the Realtors Association of Acadiana Multiple Listings Search.  The daily hot sheet tracked the number of new listings, new pending listings, new withdrawn listings, new canceled listings, and closed sales on a daily basis from 01/27/2020 to 03/29/2020.