U.S. % Change in Home Prices

This chart reminds me of the crash in real estate prices in the late sixties when REIT (real estate investment trust) stock prices dropped to pretty much worthless.  I was still in high school, but the Courts got involved in the loss of value in trust portfolios, so I was looking at those in 1974 in my accounts.  I would think that today’s national drop in home prices emulate the drop in the late sixties to some degree.

I do recall in recent years warning people not to buy into REITs, but must admit I felt a bit “old-fashioned” at the time.  Once you see those losses, you don’t forgive or forget, somewhat like people who lived through the Depression.

This post is supplemental to last night’s post and as a result of the comments that follow in that post.  The source of this info is at the end of last night’s post for those who want to look at the detail.

U.S. YOY % Home Price Changes

U.S. YOY % Home Price Changes

Talking Up Shackprices

[photopress:galen_ward.jpg,full,alignright]Nathan of nPost just did a great interview with Galen on Shackprices… Lots of gold including some indication of Galen’s vision for the future for Shackprices!

What is your long-term plan for ShackPrices?

I would really like ShackPrices to be a national real-estate search website. Our goal is to make it for anyone in America to search for a home. The plan is national coverage, more features, and a better site for people to search for a home with.

Don’t stop with this quote… Go read the whole thing! 🙂

Want to live in the Golden State? Bring lots of Evergreen State money.

[photopress:180px_California_state_seal.png,thumb,alignright]I recently returned from my almost annual vacation in beautiful California to visit my family and a few famous real estate bloggers (Dustin & Andy). And it was interesting to note what I learned about real estate in the Golden State during my two weeks down there…

Non surprises 

Bay Area real estate is still expensive. That wasn’t surprising at all. It’s been that way as far back I can remember. During my coffee talk w/ Andy, we discussed how the San Francisco side of bubble bay has popped, and the Oakland side is peaking. 

LA traffic is still awful.

Small Surprises

Santa Barbara is even more expensive than Silicon Valley.

Camp Pendleton is the only thing separting San Diego from Los Angeles & Orange County. I hope for San Diego’s sake, the Marines stay put.

RedFin has finally invaded the Bay Area. I wonder who’s next? 😉

Bay Area traffic is catching up to LA.

Big Surprises 

Home values in Southern Ventura county (home to Dustin’s new employer) are on the ridiculous side of expensive. In fact, it’s Silicon Valley expensive. I wasn’t expecting cheap prices (after all, I did grow up in California), but I wasn’t expecting this!?

I didn’t expect Santa Ynez to be as expensive as it is. Maybe Wacko Jacko’s Neverland ranch has done to Santa Ynez’s property values, what Bill Gate’s house has done to Medina’s? My parent’s home town (Santa Maria) is comparitively inexpensive, but it’s about as pricely as the Seattle Eastside is (median price ~$450K).

San Diego County is downright cheap in comparission to it’s neighbors to the north. In fact, prices there are less than 10% more expensive than Bellevue! Maybe being next to the Mexican border is keeping prices low, but I would’ve expected San Diego to be second only to Santa Barbara and the Bay Area. 

So what other markets in the country (or the rest of planet earth for that matter) have surprising prices (both more expensive and less expensive than you might expect)? I’ve heard from more than one local realtor, that many out of state real estate consumers have sticker shock when they first come to King County. And I’m still surprised that Portland is so cheap compared to it’s nothern & southern big city neighbors.

New-home sales take a tumble

The Seattle Times reports that new home sales are dropping nationally:

New-home sales fell by the biggest amount in almost nine years last month while home prices declined for a fourth straight month, raising concerns that the once high-flying housing market could be in for a rougher-than-expected landing.

The Commerce Department reported Friday that sales of new single-family homes dropped by 10.5 percent last month to a seasonally adjusted annual sales pace of 1.08 million homes.

It was the second straight monthly decline after a 5.3 percent fall in January, and marked the biggest one-month drop since April 1997.

Dear Mr. Barton,

As you may or may not know, I emailed you guys a couple of weeks before you unveiled your product to suggest that you consult at least one real estate expert, before going public. I further suggested that since I have sold real estate in five states from coast to coast, that I might be able to help you tweak your product before its unveiling. I feel very badly that some are poking fun at your great real estate adventure, by coining the phrase “You’ve been ZILLOWED!”

Here are a couple of tips for you, (or for Dustin and Galen and Robbie) If you modify your application of data according to these guidelines, you will likely increase the reliability of your online Zestimate by as much as 50%.

Seattle area: Yes, you can value property fairly accurately using the tax data in the Seattle area. But the first step is to determine the appropriate factor. Many will value out at between 1.2 and 1.4 times the assessed value. Hot areas, like downtown Kirkland or parts of Queen Anne, etc will value at 1.5 to 1.6 times assessed value. Don’t take the comps out too far, keep your radius small. Stay as close to the subject property as possible and STOP when you have 5-8 comps after throwing out the High and the Low. DON’T average the sale price of the comps one to another to determine the value of the subject property. DON’T use price per square foot as a guide. Take each sale price and divide by THAT SAME PROPERTY’S assessed value to come up with the factor. If all of the properties in that neighborhood sold at 1.44 times assessed value, then your ZESTIMATE should be 1.44 times the assessed value of the subject property. You can average the factor, but not the price. Then use a range. Chuck the high and the low, the way I learned in grade school from the good Catholic sisters who taught me well.

Example: Data equals 1.8, 1.4, 1.42, 1.43, 1.44, 1.44, 1.45, 1.47, 1.1

Throw out 1.8 and 1.1. as the high is a massive remodel and the low is a fixer. Factor becomes 1.4357142. Assessed value of subject property is $313,000. Zestimate is $449,378.54 or between $438,200 and $460,110.

When inputting tax data, do not overlook the “effective year built”. Currently your program is not noticing that very important date, and reverting to the original year built, throwing the numbers way off on 80% remodels. You can use the 1.8 and 1.1 in the sample above by saying “Your home is valued at between $438,200 and $460,110. If you have just remodeled the interior, the price might be as high as $563,400 (1.8 X $313,000). If it is a fixer it may be as low as $344,300 (1.1 X $313,000).

For Seattle area, always use the assessed value of the subject property against the neighborhood factor.

Briefly, for Los Angeles beach areas: DO use price per square foot, as by and large that area does not have underground basements and the tax assessment increases to sale price every time a property sells (unlike Seattle and many other areas)

Florida: Do use price per square foot and keep the comps apples to apples. Watch the lakes. Price properties on lakes against other property on the lake and interior against interior. You are already OK in FL for the most part, so you can leave that alone.

PA, NJ and most of the Northeast of the country, keep the radius short and use price per square foot. Then find and apply the neighborhood factor and average the two answers.

Hope that helps you, Mr. Barton. Or maybe it will help Robbie and Galen come up with their own “Better than Zillow!”

Have a great sunny day in Seattle!