Happy Thanksgiving ... with a side of Market Trends
I want to wish everyone a Happy Thanksgiving and a wonderful end to 2021. I am very thankful 2021 has kept me so busy this year completing appraisals in Nevada County!
I recently received an email from Shelley Mortara at Nevada County Mortgage. She reached out inquiring about the current trends in Nevada County. I love how local lenders like Shelley and her team want to keep their fingers on the pulse to betters serve their clients. I did some analysis and wanted to share.
For each and every appraisal I complete, I start with completing two analyses to get a good indication of what the market is doing for properties that directly compete with the subject property. For the graphs below, I’ve analyzed all sales in Nevada County (data source Metrolist) to get an idea of how the market as a whole has performed.
Individual Sales Analysis
This is a graph of every sale in Nevada County from 2021. (In order to see the trends better, I've hidden the sales above $1.75M, but they are accounted for in the trend). The linear regression trendline (the straight red dotted line) indicates an increasing market at a rate of 10.2% over 2021 or 0.93% per month. A 3rd order polynomial trendline (the curved green dotted line) shows where the data indicates rapid rising and leveling off. As you might suspect the graph indicates the last couple of months leveling off from the rapid appreciation we were experiencing in the spring and summer months.
Median Sales and Grouped Median Sales
Another way to look at the data is through monthly median sale prices. And because Nevada County doesn't have a whole lot of data points, I do a second analysis of 3 months grouped median sale price data. So the first point is the median sale price from Jan - March, the second is Feb - April, the third is March - June, and so on. Once all of these points are plotted (both median and grouped median) I add a linear regression trendline (the straight red dotted line). This data indicates an increasing market at a rate of 7.34% over the year and 0.67% per month. One thing to remember about analyzing median sales, they can be heavily influenced by a high sales volume in certain price ranges. So if over the summer we had a bunch of homes selling in the $1M+ price range and then in the fall, a lot fewer properties sell in that price range, a median sale price analysis is going to look like it's declining. Something to keep in mind when you see prices starting to drop after august in the graph below.
Market Value Below Purchase Price
Shelley asked, “We would like to have a pulse on the market. Do you have any information of appraisal market values indicating the purchase price or less than the purchase price?”
Your question regarding appraised values less than purchase prices is a really good question. I've never actually measured it before. I can tell you offhand, prior to the last couple of years, it rarely happened. Off the top of my head, it happens less than 5 times a year and typically only once or twice. And this should make sense; in a normal market, if a home sells on the open market, with knowledgeable buyers and sellers, there is a high likelihood the home is going to sell at or near its market value. Rapidly increasing markets create a huge challenge where the data and closed sales can lag a little behind how quickly prices are rising. Even if appraisers correctly measure the market and account for appreciation, the market may be going up faster for that specific home. Nevada County has also seen buyers coming in from other areas where they may have capitalized on equity and are seeking a lower-priced market. In that case, they see Nevada County (even with rapidly rising prices) as a "steal." Being flush with cash, they may be willing to pay higher than market value, because they just capitalized on record prices elsewhere. So far in 2021, I have appraised 81 purchases, 10 of which the market value indication was less than the purchase price. Many of these were for land sales. That equates to a little more than 12% of my purchase appraisals. Most of these were from Jan - June when prices were rising the most.
Conclusion
Market values have continued to rise during 2021. Most of this appreciation happened at the beginning of the year. Values have started to plateau in the last couple of months, but this is typical this time of year. There are fewer homes for sale and fewer buyers seeking homes during the winter months.
Enjoy the 2021 holidays and I plan on having a very thorough market analysis recapping 2021 in January. Happy Holidays!
DISCLAIMER: All information presented in the Nevada County Appraisal Blog is meant for educational purposes only and is NOT intended for any other use. This information is not considered an appraisal and does not support any specific value opinion or eliminate the need for an appraisal for a specific property. Please give us a call at 530-632-3428 to order an appraisal for an accurate opinion of value for a specific property.