Monday, March 17, 2014
The good news about our part of the country is that real estate markets tend to react slowly. We look at these reactions and try to extract what is known as a trend. According to Webster's, a trend is: to extend in a general direction; follow a general course; veer in a new direction. When we look at the number of closed sales that took place in the last year, active listings, months of inventory, absorption rate, median sale price, median list price, median days on market, and median list-to-sale ratios, and local economics, we are trying to see if several of these areas are pointing in a new direction. For example, we would not say that property values are increasing/declining if we had only one of the above areas indicating the change; however, if we had several of the above areas pointing in a new direction over a long period of time (say, 4 quarters), then we would be inclined to say that a trend has developed.
Take the above chart for example. The data from this chart was pulled from HKAR MLS to see if there has been a trend developing between the median sale price and inventory in Radcliff for the past year. Based off the above data, we see only 1 quarter where this is true, which is not enough time to say that this is a trend in our area. What I've seen in the past is that when inventory stays at or above 12 months, then the median sale price starts to drop. Time will tell if these indicators combined with the changing economics of Radcliff, and the increase in inventory from Knox Hills will start to effect property values.
Thanks for reading, and I hope you learned something. Stay tuned for the upcoming release of a book I'm writing on the appraisal industry, and don't forget to head on over to our Facebook page and our Google+ page to leave a review.