The Real Story …
News and commentary about the real estate market and related topics.
Dave Parrish, ABR, CRSA, CSP, GRI, ePRO, Realtor
Home Values & The Real Estate Market in Jefferson County …
It is certainly true that Birmingham is a more stable Real Estate market than those featured in the news … in terms of foreclosures Alabama rates #34 in terms of the number of foreclosures (meaning that only 15 states have lower foreclosure rates). Even so, Birmingham has not been untouched by the declining economy.
All real estate is local and local in this case is certainly more granular than just Jefferson County or the City of Birmingham. The local real estate market is defined at levels at least as low as neighborhoods within areas of the city/county … Sometimes, markets can be defined as fine as the street or range of addresses on a given street.
For that reason averages can often be misleading … if we say that an area has experienced a 2.4% increase in property values in a given period of time that doesn’t mean that every neighborhood or sub market in that area has that experience. Also by definition an average is simply a normalization of a range of values. Roughly half of the properties in the area experience a lower rate of appreciation while the other half experience a greater appreciation. But Board of Equalization must use a averaging mechanism to reach its assessment of value. Real appraisals of properties would be cost prohibitive (necessitating even higher tax/milage rates). When was the last time your allowed entry to your home by a County Tax Assessor?
To say that foreclosures are not used in determining value is at best misleading. There are sub markets and even whole sections where the number of foreclosures is so high that they must be considered to have a comparable property on which to base an assessment.
Short sales (i.e. sales where the bank / mortgage holder allows the homeowner to sell a property for less than what is owed on the property to avoid foreclosure) do not show up as foreclosures but do affect market value.
That is not to mention, other distressed sales where sellers are forced to sell to avoid foreclosure or are providing significant buyer incentives in terms of things like paying all closing costs and pre-paid items for the buyer in amounts up to 6% of the sales price (an already reduced market value) to consummate the transaction. In these cases which are increasingly common, the home actually sales for up to 6% less than the county is able to see in their records.
Finally, you must remember that these assessments (the County’s Assessed Market Value) has a built in time lag which makes it less accurate than that being experience in the present. We never hear complaints about this time lag in a truly appreciating market … but they become painfully apparent in a declining market.
The fourth quarter of 2008 (which was outside of the County’s latest assessment window) was a brutal market in which we saw some rather drastic price reductions were seen in all areas.
So where is the market … Birmingham is a stable real estate market … but it is a market which is in a down cycle … expect some additional erosion in real market value for a while longer. While Birmingham is rated as the #4 market in the recovery (CNN May 2008), we are still definitely in a Buyer’s Market (defined as any time when there is more that 6 month inventory of homes on the market).
13129 Homes on the market (06/15/2009) ..
996 Absorption rate / Homes sold per month 996
(average per month last six months 5975/6)
13.2 Months inventory
When supply is high prices are down …
Due to the emotional value we place on them, we have historically refused to see our homes as commodities …but in truth they are a commodity whose value fluctuates with the market for them. When supply is low, prices rise … when supply is high, prices fall …
So Buyers have a great selection from which to choose at market adjusted prices.
Low interest rates! But they are now beginning an upward surge … Do not hold out for a return to 4.5% … It’s not going to happen! Expect at least 8% by the end of 2010 … but that isstilla historically great rate .. a long way away from the 20% rates if the 70’s.
First Time Buyer Incentives (anyone who has not owned a home in the last 36 months):10% Tax Credit up to $8,000 (Expires 12/1/2009 … sale must close before this date).
Sellers beware … The buyers are watching the national news and expecting great deals. Most do not understand that the Birmingham market is different from the national market … and certainly different from the markets in Nevada, Florida, California, Arizona, Michigan and Ohio. Another round of foreclosures is on the horizon for this summer! Expectations for Buyers in this market are high as towhat they will get for every dollar spent. Examine your reasons for selling … Are you truly motivated to sell in this market? If you are not a motivated seller and put your home on the market, you create frustration for all and contribute to the market pressuresthat drive prices down. So ask yourself is now really the time for me to sell?
However, it is still a great time to sell if you are moving up in price range … I would recommend a jump of at least 50% in market values …but sell before you buy.
Note homes priced above $250,000 are moving very slowly. Homes above $417,000 (Jumbo loans) are even slower moving due to higher interest rates on jumbo loans often as much as twice the FHA Rates (today’s rates on Jumbos running in the 10-12% range.
Nearby local markets that have suffered substantial drops in market value include: Center Point, Grayson Valley & Pinson.
