Friday, May 15, 2009

10 Reasons There Aren't More "Move-Up" Buyers in the Charlottesville Albemarle Area

Just one month ago, the number was 3608, according to Realtor Greg Slater, when he appeared on April 16's Charlottesville--Right Now! hosted by Coy Barefoot on WINA. Slater, along with CAAR prez Michael Guthrie, discussed the 2009 First Quarter Market Report. They stated that the highest they'd seen the inventory number was 3673, back in the First Quarter of 2008.

The 3700+ number reflects everything available in the Cville MSA plus the Valley and surrounding Counties, including proposed projects in addition to new and existing homes. The 3700 does not include houses that are for sale without the use of a Realtor.

What's the problem here?

Obviously, pricing.

And obviously, there's a lack of buyers.
Specifically, the "Move-Up Buyer."

The "First Time Home Buyer" is driving the market right now. In Charlottesville between January 1 and May 3, 77% of all contracts were under $300K. In Albemarle, the percentage was 62%.

Where are the "Move-Up Buyers?" The short answer is that many would-be "move up" buyers are now stuck in their homes because they won't make enough by selling to achieve the next "level." This is not only because house values are falling, but also because pricing in this area is out of synch with wages, no matter what the wage is. A 4 bedroom home for $750K? Sure, in the days of no money down, interest-only loans. Not now. Moving up is harder than ever nowadays, when a "starter" home is about $250K, and today's buyer can expect to build no equity for several years. According to the Virginia Housing Development Authority (and many economists, among them Robert Shiller, Nouriel Roubini, Paul Krugman, et al) prices will be declining for some time to come (see links at bottom). As always, a buyer should be purchasing due to a need for housing, not in the anticipation of making a profit.

Between Gen Y being priced out of this market, and the Baby Boomers either approaching retirement or freaking about recent loss of personal wealth, there are fewer buyers than ever.

BUT what about the sellers whose properti
es are on the market now? Where are they going? Not many of them are turning around and buying. As CalculatedRisk says, it's "One and done." When you look at the transfer history of the properties for sale, you start seeing the same stories:
  • seller is leaving town for a new job
  • seller is leaving town after a UVA program or residency ended
  • property is for sale by a trustee due to owner death
  • seller is retiring or ill and downsizing
  • seller has been in the property about 5 years--there's an Option ARM resetting
  • seller wants to unload an investment property
  • the property is REO or short sale
  • the seller is trying to downsize due to financial hardship before a foreclosure or shortsale
Maybe May's contracts, which will close in July or August, will bring more "move-ups." Right now, it's looking stagnant.

Supply far exceeds demand in this area, but there are sellers who have made significant cuts to Askings. However, many sellers remain firmly optimistic (not just in this area!) about their homes' value: according to Zillow, 74% believe their homes will not decline in value in the next six monts.

And nearly 1/3 of homeowners are considering putting their homes on the market once the market "turns." Talk about a Shadow Inventory!

It's the same old story in this area: too much inventory, prices far beyond wages, homes that achieved a bubble "value" and now have owners who can't or won't sell for less, no new jobs coming this way (except those spoken for at DIA/NGIC), a luxury component that is frozen, and not enough buyers.

With the lowest sales in a decade, the market is due for a correction in pricing. Big City Prices will in many cases bring a big city correction.

Related Reading below the graphic. The graphic shows what used to happen in the housing market.


47 comments:

Dave Phillips said...

Just to set the record straight, the inventory of homes for sale actually peaked in May 08 at 4050 (based on the CAAR 08 3rd quarter market report http://www.caar.com/files/market/01_2008/2008%203rd%20Qtr%20Market%20Report.pdf)

The inventory declined very slowly until March 09) The seasonal local market always sees an increase of inventory this time of year and that generally peaks in May. The real comparison here should be that inventory is DOWN over 300 units from May 2008. While that is a glimmer of good news, we are still no where near an appropriate level of inventory.

As reported for the past two years in the CAAR Market Reports (available at CAAR.com), excess inventory is the number 1 problem in the market today. Until we see this number retreat to the 2000-2500 range, we will be in a significant buyer's market.

John Doe said...

When prices shift to a place where more people can buy first time homes and others already in them can make the next step this will truly be a buyer's market. An issue is that there's literally not the population and not a population with means for this to happen any more on a regular basis.

But the term 'buyer's market' really doesn't mean much here especially in the County. In other places it means that prices have adjusted AND there's a lot of inventory.

Prices here are being held steady by those who made bad financial choices in the past seven years as well as those who helped them to do so: agents, bankers, appraisers.

Inventory won't fall back to 2005-6 levels because too much has been built and converted to purchase property since then. So technically, it's going to be a "buyer's market" forever.

Anonymous said...

John Doe says: "So technically, it's going to be a "buyer's market" forever.

I hope he's kidding, but I fear not in light of the rising tide of "the world is ending" comments on this blog.

Yes, prices are too high, sellers are in denial, etc. etc. But if you're a buyer, you don't have to worry about "the market." You need only find one home at the right price. The reality is that some sellers are getting desperate, and good buys are available.

My evidence? Just look at recent sales. Find out initial prices asked, price reductions and finally actual prices paid. Big total reductions in many cases.

Then consider the incredibly low mortgage rates available now.

You'll find that you can get a nice home at a reasonable cost.

But it's easier just to complain about how expenive everything is.

downtownenvy said...

Anonymous - It sounds like you have had some house buying luck here in Cville recently. Can you give us a brief breakdown of how well you did, and how you went about constructing your offer?

Any info. on successful buying in this town is always appreciated. Thanks in advance.

Real C'ville - The Bubble Blog said...

Dave, Thanks for the update. John Doe, good point on new construction and conversion. Anonymous, yes, it can be a good time to buy a house if buyer can stay in it for a number of years.

But you pose the perfect question: What's the "right price"?

Problem is, in many cases (not all) the house is going to decline in value for some time to come. How long? Months? A year? Two? Four? How far out will it be before a new buyer starts building equity?

Even Realtors who come on this blog say a buyer has to be able to stay in the house for at least five years, possibly longer.

How many people can count on doing so in an economy such as this? (We don't have the answer. Nobody does.)

And what's a "reasonable" cost? If you buy a house at $500 that previous owner paid $300 for in 2004, as did some of your new neighbors, is that "reasonable" b/c time has passed?

Or do you mean "reasonable" is a matter of personal perception?

If you have some tips for Downtownenvy, please provide.

BTW, the "world is ending" comments are much much stronger on other blogs...just visit baseline scenario, calculatedrisk, the big picture, housing doom, etc. :0)

Anonymous, too said...

I agree with Anonymous - one can find a nice home at a reasonable cost. It's somewhere out there. But you better find it fast before it's gone!!

Here's what's bugging me about all of this hype of low rates and tax buyer credits and "reasonable" home prices: what happens when the federal government turns off the tap? They're keeping rates at ridiculous levels with newly printed dollars. They're reducing govt revenue by giving the home buyer tax credit. They're funding Fannie/Freddie/FHA and handing out cash to banks so they can make loans. All of this will end at some point. So what then? Are banks going to be lining up to fill the hole left by our government?

If home prices can't even stabilize now with all this stimulus in the system, what makes people think that the housing market, or economy, will improve after the stimulus is gone?

The music has ended. You can stop humming the tune trying to convince the rest of us it hasn't.

Anonymous said...

In response to three previous posts:

First, I apologize for suggesting that the general tone of this blog is too negative. After all, it is called the Bubble Blog--there is an inherent point of view.

I became interested in this blog because I was looking for information about the local market that would help me buy a house at a good price. This blog has been very helpful and provides a valuable service.

A post above says: "The music has ended. You can stop humming the tune trying to convince the rest of us it hasn't."

If you're referring to my previous post, I don't have to convince you of anything about your world view. I was only talking about buying a house.

There is an admission above that "it can be a good time to buy a house if the buyer can stay in it for a number of years."

There is another statement that "Even Realtors who come on this blog say a buyer has to be able to stay in the house for at least five years, possibly longer."

Well, yes. That has always been the case. People forgot it, just as they forgot that a home's primary function is not to provide infallible investment profits. In this economy, buyers should consider whether it is a good idea to take that step now based on their situation.

Will a home bought now go down in value? Quite possibly for a while. But this is not the stock market. It is your home. And if you "buy right," you reduce that risk.

Plus, as I mentioned previously, today's historically low mortgage rates have significantly reduced the cost of home ownership.

How do you buy right? First, forget about asking prices. Second, check actual recent sales of comparable properties. There may not be many but there are some. Third, check the 2009 assessed values. Regardless of what you think of them, they provide some measure of value. Many recent sales have been in the general vicinity of assessed values. Fourth, make low offers.

Yes, many if not most houses are overpriced. But you're only buying one.

me too said...

I'm interested in this:

"My evidence? Just look at recent sales. Find out initial prices asked, price reductions and finally actual prices paid. Big total reductions in many cases."

Could you please give some examples you know about?

I'm also interested that DP corrected the inventory number but didn't address the lack of move-up buyers.

Nobody I know is moving up. There are a couple of us looking for a first timer that's not a tiny box but otherwise those who own are staying put even if they need more space.

me too said...

one more thing: " Many recent sales have been in the general vicinity of assessed values."

Anonymous, are you from out of town? I don't mean that snarky.

The assessments in VA have nothing to do with appraisal. Assessments are based on what other houses of similar size/in similar neighborhood have SOLD for.

If things are selling at inflated prices the assessments are inflated.

Only when an owner challenges the city/county on assessment will an assessor actually come and check out the house.

Otherwise it's a drive-by check it out from the curb and based on sales figures.

Not the best system for owners but great for the tax base.

Anonymous said...

In response to recent questions, my research was admittedly limited to Albemarle outside of Charlottesville and to houses above the area median price. Yes, I'm from out of town, but I know the difference between assessment and appraisal.

Assessed values provide at least some indication of value because recent sales prices have been near sales prices in many cases among the properties I've looked at. And at least in that group, assessed values have actually declined over the last three years.

Me too said: "If things are selling at inflated prices the assessments are inflated." Well, if they're selling at those prices in a generally weak housing market, then maybe they're not overpriced.

Me too said: "Nobody I know is moving up. There are a couple of us looking for a first timer that's not a tiny box but otherwise those who own are staying put even if they need more space."

I'm confused by that. The first-time market is apparently strong, so there is apparently ample demand. And if you want to move up from that level, you can sell at a decent price and take advantage of low mortgage rates to buy in a higher price segment that apparently is less strong.

Second, if you're looking in the city, maybe you should look outside. In many parts of the country, people have to commute a little farther to work than they'd like. Charlottesville is hardly unique in that regard.

Third, if one wants to argue that house prices are generally too high given local income, I agree. Again, though, that is a common situation. Charlottesville is a more desirable location than many, and prices inevitably reflect that.

Fourth, you can say that the local economy is weak, but it's still holding up better than the national averages.

In terms of recent sales, their initial asking prices, price reductions and actual prices paid, a real estate agent with access to the MLS can provide that information. Same with properties currently on the market.
I suggest you also check out Trulia.com, where you can get information on price reductions of properties currently on the market.

src said...

me too is right. assessments are a lagging indicator. the county/city were late with increasing them when prices were rising and will be slow to decrease them as prices fall. (the thought of losing revenue does funny things to government officials)

anonymous said, "Will a home bought now go down in value? Quite possibly for a while. But this is not the stock market. It is your home. And if you "buy right," you reduce that risk."

thanks for the investment advice. first time i've seen an anonymous commenter go that far on this blog.

anonymous sounds like a realtor. i guess pavel got tired of tarnishing his name.

Anonymous said...

SRC says: "thanks for the investment advice. first time i've seen an anonymous commenter go that far on this blog. anonymous sounds like a realtor. i guess pavel got tired of tarnishing his name."

You're 0 for 2. I am not a realtor. And I was not offering investment advice.

Anonymous said...

you paid in the low to mid 2's for a house 5-7 years ago. that house will now get you in the mid to high 3's. (not that it would sell! but this is what it would be listed for!) then you can turn around and buy a house of the same size in the mid to high 3's.

that's not moving up.

in order to move up you have to have cash from a raise or a windfall. if you've had your kids in the meantime your expenses have grown. if you had money in the market you've lost a lot and your retirement took a hit.

Anonymous said...

Anonymous said,

"Well, if they're selling at those prices in a generally weak housing market, then maybe they're not overpriced."

Nope. If house were truly priced to sell there wouldn't be two years worth of inventory. Even if you ignore the $1M houses.

Some people just need places to live. They don't know better than to believe the hype about this market. People hire Realtors to tell them what to pay. And to price the houses to sell. If Realtors are using CMAs, it's not surprising that things are selling at or near assessments.

To suggest anything else in a market that's been controlled by a trade association until very recently is thoroughly disingenuous. Though of course any Realtor will deny this.

But you're right that some places are selling below asking prices. Sometimes much below. So you have to wonder What's with the asking prices? They're stuck in the past.

Example is 708 Park St. WTH.

Anonymous said...

The above post says: "To suggest anything else in a market that's been controlled by a trade association until very recently is thoroughly disingenuous."

I hope for your sake you're joking and that you don't really believe it works that way.

Anonymous said...

anonymous @ 11.08, curious what you think the role of realtor, assessments, and CMAs are in any market

Pavel said...

FYI: I always use my name when I comment. Also, some builders do not put all of their available inventory in the MLS. For example: Ryan Homes only lists 2-3 models in MLS for their Pantops community... Many many to-be-built units are actually available. So even though they are not in the "active" category of MLS - they really are a major factor.

Real C'ville - The Bubble Blog said...

SRC, trust us, that anonymous commenter wasn't Pavel.

Anonymous 10:40 a.m. May 17, the following isn't investment advice: it's a friendly suggestion. Before you purchase you should look into tax assessments as a basis for "selling price" and "value." IOHO, you're going to want some very detailed information on how many sales were used to determine the assessment. And how many properties have sold recently.

Sales at the higherer end are not only slow but more likely to see larger price drops right now and into the future. Some subdivisions are more vulnerable than others in this economy.

Like anonymous at 11:53, we'd be interested in further words on your 11:08 comment. A number of buyers have a similar opinion as 10:03.

And 10.03, what is "truly priced to sell?" Is it the $1.1M house now dropped to $649K? Relisting: MLS #465681

Anonymous said...

This has to be the best real estate market in the country! How else can you explain the new listing at 3515 Rocks Mill: bought new in 2005 for $1 million; now for sale at $1.5 million?! The line forms here . . . "Rocks" in the head.

Oh, and BTW guys, there is this new-fangled technology called digital photography -- how about a few more pictures? For what some of the realtors (expect to) make on these sales can't they include more than three or four photos? Why do so many sellers in this area accept such third-rate marketing? I've seen some really great tools elsewhere that show multiple photos of every room with dimensions, the yard and surrounding area, etc.

michael guthrie said...

Anonymous 10:03
I as the current President of CAAR, am interested in hearing more about how you think the local Realtor Association is controlling the market. I look forward to reading your response.

Name/URL said...

Realtors aren't controlling the market. Any more. The days of Realtors being able to motivate fence sitter buyers are over. An agent can say "buy now or it will be gone" but who cares? There will be five or ten or twenty more places tomorrow. An agent can say "Buy now because interest rates are going up" but no, rates aren't going anywhere. Too much inventory, too many foreclosures nationwide. Or how about UNCLE SAM WANTS YOU TO BUY NOW, which is an ad in today's Cville Business Journal. Sad. No, a lot of Realtors right now are just there to unlock the doors.

michael guthrie said...

Name/URL:
I am glad you saw our ad in the Business Journal today. Although buyers need to be very savvy as to what to buy or whether this is the right time for them, statistics show that many folks are taking advantage of the Government's offer of a $8,000 tax credit to buy a home. Our ad was to make sure folks knew that opportunity was out there. I think you will be proven wrong that interest rates won't go up. I hope you are right but I truly believe rates will trend up and it will be awhile before folks see under 5% fixed rates again. If you have read my posts in the past, I am not saying this is the right time for everyone to buy or sell. Folks seek counsel from someone they trust and who has their best interests at the forefront. That way they can make the right decision as it relates to their current situation.

Anonymous said...

Buyers should just wait patiently to see asking price reductions 2 or 3 times greater than the 8K tax incentive.
Michael, I wish you address 8K ad to local home sellers so they get real and price their properties to sell in order to attract first time home buyers.

Nalle said...

Michael might well be right about interest rates. Hard to imagine we won't have inflation when inventories stabilize and capacity utilization increases (ie: demand and supply stability), and when we do the Fed will raise interest rates.

Another data point for y'all, small house (724, I think, Nalle Street) was recently fixed up nicely, but is small, I'd guess around 1000 sq ft or less. Went on the market, last week, for 225,000 and apparently went under contract this past weekend. Is this a case of great deal considering tax incentive and low rates? Or perhaps folks are so focused on finding lower prices that they are overlooking size etc. . .

Real C'ville - The Bubble Blog said...

Sure, mortgage interest rates will go up. But when?

One point of The Fed pushing mortgage rates artificially low is so new buyers take on the oversupply of existing homes. But nationwide foreclosure filings hit another record in April; more than 2 million foreclosures are expected this year. The problem with unaffordable mortgages is so critical that the Obama Making Home Affordable plan is now incentivizing Short Sales.

This means even more distressed properties will come on the market.

In order to stabilize the market and prevent prices from their continuing drop, interest rates will have to remain low, won't they?

And then there's the mortgage math:

30 year fixed at 4.8% for 400K = 2100/month

30 year fixed at 6% for 340K (representing a drop of 15% in Asking Price) = $2038/month

(15% is conservative estimate, IOHO)

You could go further and say that the 400K house will not only have a 15% price drop, but that the buyer will also have the low rates:

At 4.8%, $340K is $1783/ per month.

Nationwide, the average "value" drop is 17+%; in the hardest hit areas it's currently 40%. And according to NAR, 50% of last months sales, and Pending Sales, are due to Foreclosure purchases (no move-up buyers when the owner is a bank). More declines are expected.

This area has big city prices, as we've said in the past. But it hasn't had the correction of big cities or the correction that the Va Housing Development Authority sees down the pike.

Is anybody going to suggest that prices are NOT going down in this area? That appreciation will be anything but declining or flat for several years to come? Anybody? Michael?

Nalle, the little jewel boxes that are perfectly appointed (and even the fixer-uppers) priced $169-230K do go fast. It's a condo alternative. You'll notice that the larger fixer-uppers in Belmont, Fifeville and 10th & Page are no longer moving fast, even though some are now priced in the upper 100's, because buyers (who intend to live there, not investors) know they can't "flip." And the pricier houses in those areas take a long time to sell (or don't sell) because the population interested in these areas--Generation Y--is priced out.

Name/URL, Uncle Sam DOES want you to buy a house. :0) Some other ads in the CBJ also wanted you to know that it's a BAD IDEA to wait (the ad uses caps) and that it's an IDEAL TIME to buy.

Anonymous at 8:16: Last year's tax incentive was $7,500 and has to be paid back over 15 years. This year's tax incentive is UP TO $8K, no pay back. What if the next tax incentive is even better?

Of course, anything's possible. The Treasury bubble could burst at any time. The Bear Market Rally is due to end soon. And unemployment will be over 9% nationwide very soon. And let's not forget there's always a chance that pigs might fly.

Anonymous said...

New to CAAR.com: bought in October 2007 for $525,000; January 2009 assessment $508,000; and now listed for . . . $695,000!

What planet are these sellers from? And what about the listing agent who went along with this?

Anonymous said...

Come on anonymous. You can do better than that with the next listing. MLS 465723 for $819k. Bought in 2004 for $440k. Assessed at 100,000 below asking.

Anonymous said...

Anonymous 11:05am and 1:42 pm,
Lets not overlook yesterday's new listing for 949K, purchased in '06 for about 728K and assessed at about 747K. Yet again...owner is agent.

lucky one. said...

As a "lucky one" I feel I must chime in and give my experiences in this market. My family was fortunately able to sell our house and find a "move up" home. First on the selling end We were under no precieved notion our house was worth more than it was. We had a total of two separate people come look at our house the second made an offer.. It was considrably lowr than what we were asking, but by neogiating we got the sale price to a leel acceptable to us and the buyer.. A price right around county assesment. Now, in the end did we make money? No not after you consider the money we put into the house over the seven years we lived there and the total amount of the mortage payments... But when we bought the house we did a 30 year fixed at a decent interest rate for the time period. What we did get though was enough to put down on a new house with a new 30 year fixed and lower interest rate. So our payments rose by about 200 a month. We budgeted we could afford this based on our jobs and a confidence w ecould keep the jobs.

Now for the new house, We looked and looked, and looked some more. We found one house, had a contract but the home inspection killed that deal. We felt lost and had almost relagated ourselves to renting. then a house came up and the owners had priced it to sell, we had to act fast and we did. There are houses out there, with people willing to sell them. take your time be patient, research, make and offer you know you can afford and do not be afraid to start well below asking. Also do not always listen to your realtor, no matter how long the have been in the business... We found even though we had a long time realtor with a great reputation, in the end our work and focus on what we wanted made the deals work. No knock on the realtors, but when making a purchase this big, it pays to educate yourself. Also get the long term loan, even if you plan on staying a short while. things change and you may be there longer than you think. Then again the days of option arms are pretty much gone anyway as they should be.

michael guthrie said...

Great input lucky one...
You did a great job in explaining how to handle things on the seller and buyer end. I would be interested in hearing why you said "don't always listen to your Realtor". Did you mean don't always do what the Realtor tells you or did you feel the Realtor was trying to pressure you in a direction you didn't want to go. If they tried to pressure you, I am sorry. If the Realtor gave you their input and advice but you chose to do it differently than that means the relationship worked. You picked a Realtor with experience and a great reputation whom I assume you trusted. They gave you their honest opinion and then allowed you to do it your way with a successful result. A true team effort and the way it should work if that is what happened.

Jim Duncan said...

Lucky One -

"Also do not always listen to your realtor, no matter how long the have been in the business... We found even though we had a long time realtor with a great reputation, in the end our work and focus on what we wanted made the deals work. No knock on the realtors, but when making a purchase this big, it pays to educate yourself."

Amen. Here's how I work, for example. I want and expect my clients to trust me, but I also want and expect them to trust themselves - and to educate themselves as much as possible.

After all, they are the ones borrowing hundreds of thousands of dollars.

In the same vein, I want them to question me - question my advice - not because they don't trust me, but they will feel better if I can back up my advice with facts/reason/pertinent examples rather than, "because I'm a Realtor."

Thank you sincerely for sharing your experience.

Anonymous said...

11.05, 11.42, and 3.07

Maybe they're using the same model of CMA to price those houses.

Maybe Michael or Jim can weight in on that.

Anonymous said...

A suggestion was made several posts back: "Before you purchase you should look into tax assessments as a basis for "selling price" and "value." IOHO, you're going to want some very detailed information on how many sales were used to determine the assessment. And how many properties have sold recently."

Aren't you confusing assessments and appraisals? If not, how would I find out how the assessor determined the assessment?

Real C'ville - The Bubble Blog said...

Anonymous 12:28, sometime tonight we'll post an answer, a clarification (which may not be necessary), and some links. In the meantime, somebody else might chime in.

Lucky one said...

Jim and Michael,

We still have a good relationship with the realtor, My not listening had to do with the house that had a bad home inspection, the realtor wanted me to wait and give the seller a chance to fix it, but I knew in my eye the house would never be right or "tainted" if you will... May not be rational thinking, but again I'm the one who will live there and be paying nicely to do so, So I'm going to make sure I feel comfortable. I just had to express that I wasn't going to buy the house no matter what and it was best for all involved for us to just move on. Other than that we took the advice of the realtor and bounced stuff back and forth, and ultimately it was us who decided what to offer on a house etc.

Real C'ville - The Bubble Blog said...

Lucky one, thanks for adding input. If you'd like to further elaborate on how you came to price the house you sold and how you decided what to offer on the house you bought, folks would be interested.

Real C'ville - The Bubble Blog said...

Anonymous at 12.28, we were responding to Anonymous on May 17 at 10.40 a.m., who was positing that if recent sales were at or near tax assessments, maybe that's an indication of "value."

We were NOT suggesting that this IS an indication of "value." We were saying that if this particular buyer wanted to go down that particular road, a little more "homework" is in order. We were making a "friendly suggestion" instead of telling the buyer what to do. :0)

You are correct in asserting that this would be confusing assessment with appraisal.

Tax assessments are based on recent sales, unless a homeowner objects to the assessment: and then some "appraising" skills are brought into play.

So if recent sales were at bubble prices, why would a buyer want to consider the tax assessment as additional information? It's just another version/presentation of bubble prices, isn't it?

From an earlier post:

"As the FAQ on the City's website says, "The assessment/appraisal buisiness is not an exact science. The assessor does not get the opportunity to go in every home...[M]ost assessments are based on exterior assessments."

The assessor attempts to base the taxes due on "Fair Market Value," which the City defines as "the most probable price expressed in terms of money that a property would bring if exposed for sale on the open market."

The City compares "similar properties of the same type and class which have sold recently in the same neighborhood, taking into consideration factions which may effect value; such as location, condition, size, etc. Recent sale prices in your neighborhood determine what your assessment will be."

If there are no recent sales, the assessor has to use sales from a "comparable area to determine values."

Keep in mind that the Assessor by law is using properties that have already sold. The Assessor's purpose is to collect revenue for the City. The Assessor is not predicting what a property will sell for now or in the future."

That post in its entirety is here:

http://realcville.blogspot.com/search?q=deadline+for+city+property+tax+deadline

Despite that assessments are based on sales, listings here (and elsewhere) STILL have lines such as "priced $57,000 below assessment!" or "well below tax assessment!" -- as if this has anything to do with pricing.

Nest's Keith Davis has a good post about the relevance of tax assessments to asking prices on his blog "Dirt Around Grounds." He asks if people pay attention because they are accurate reflections of value..."Or are they accurate reflections of value only because people pay attention?"

Read that post here:
www.dirtaroundgrounds.com/?p=224

Here's a post about 2009 property tax assessments:
http://realcville.blogspot.com/2009/01/charlottesville-redefines-healthy.html

You might also want to check out the Tax Assessors FAQ section online.

County:
http://www.albemarle.org/department.asp?department=finance&relpage=1999

City:
http://charlottesville.org/Index.aspx?page=12

Anonymous said...

I still say that assessed value provides a useful indicator--not infallible but useful--of real current value if houses subsequently sell for at or around that number. In other words, 2009 actual sales prices near the homes' 2009 assessments. How can you argue against that?

If you want to say that assessed values and home prices generally will decline from current levels, that's something else, and I don't disagree.

But if you want or need to buy a house soon, this is a buyer's market for those who do the research...

Asking prices generally remain way too high based on any historical measure I've applied. This includes significant premiums to assessed values. But when houses don't sell, it creates pressure for those who have to sell, and such owners reduce their asking prices and eventually accept discounts to those asking prices.

This is why there are many empty houses and price reductions even when asking prices generally remain excessive.

Again, I'm only talking about the process of buying one house. I am not railing against real estate agents, sellers or other participants in an alleged conspiracy to keep prices artificially high.

jag said...

anonymous, i don't get why you make distinction between assessments and sales prices. they're the same thing in this area. seems like you don't understand this.

ignore the assessments. putting them into a real estate ad is a tool of real estate agents and/or sellers as if they are ADDITIONAL INFORMATION from an outside source. it's not additional information.

go to the city or county links and read the faq's if you don't understand the assessment process.

also you can find all recent sales on the county's website by subdivision and with date parameters.

gisweb.albemarle.org

for the city you have to look up individual properties or rely on an agent to give you recent sales.

Pavel said...

I use the assessment data to educate sellers on the sold to assessed ratio in specific neighborhoods. For example: when I was interviewing for a listing with a FSBO, among my other market analysis tools, I presented ratios of recent sold to assessed value for his subdivision. While majority of homes fell into a predictable ratio of .95-1.15, Seller wanted to price his home at a ratio of 1.4. Considering his house wasn't drastically different from every other home in the neighborhood I knew the property would most likely not sell at his price. Regardless, I didn't get the listing and the property since has been rented out and never sold. Every time I do a market analysis for seller or buyer, I always pick a good number of recent SOLDS and run the assessed value to sold ratio and most of the time there is a very "defined" spread.

lucky one said...

To deterime our asking price and what we wanted to offer we did use the assesments and past transfer history. These days assessments are playing a bigger role than they ever have in the past. like it or not it's a fact of where the market is.

You can also pretty much look at a house's assesment history with the transfer history then look at the sellers asking price and make an educated guess as to if they are underwater or not.. There were several places we passed by because you could tell from those three numbers the seller wasn't coming off the sale price at all because they had purchased these places in the 2005-2007 time period and the prices they paid were crazy.. Now they are in a place that has been on the market for 8-12 months and realistically worth 20-30% less than they paid...

Again, It pays to educated yourself, when we bought our first house in 2002 things had just started to take off and realtors were showing up to the open houses for realtors only before the property offically went on the market with contract offers in hand for substanially more than the asking price. We thought we would never be able to find an affordable place then... seemed very dire.. but by being determined and paitent we found one then as now.

Anonymous said...

There are really no objective measures in this market, so I give some consideration to assessments. What else can you look to? CMAs -- you're joking, right? And when I see a seller who has priced well above their assessment I know they are most likely deluded and looking to rip-off some unwitting out-of-towner. And I know not to waste my time negotiating with such a seller.

michael guthrie said...

A while back, you asked for info showing whether or not the move up buyer is back in the market vs just the 1st time buyer. I had shared the 2nd quarter report will give us some ideas but found something interesting today. Yesterday,17 properties went from active status to either contingent or pending. Of the 17, 7 had list prices over $430,000 with 5 of those 7 being over $539,000. It is just a snapshot but will be something to watch.

michael guthrie said...

Pavel,
Who taught you the assessment ratio technique :)

Anonymous said...

Concerning the post from jag above:

Contrary to your assertion, assessments and sales prices are NOT the same when the actual sales occur several months AFTER the assessments were made--in a declining market.

And yes, 2009 assessments (not 2008) ARE additional information simply because asking prices often exceed them by a wide margin. Infallible? Of course not. Useful? Yes.

I have used the county website many times. I have extensively researched sales prices, assessments, previous prices paid, etc.

I also went to the FAQs but saw nothing about the assessment process itself. Did I miss it?

jag said...

why do you need assessments if you have sales in a declining market. why doesn't sales prices tell you what you need to know if they're the most recent information. why isn't that enough for you?

fwiw, i look at asking prices and usually take it as cue as to how realistic seller is. then look at previous selling price. if it's during bubble period you take that into account.

google "roosevelt barbour" on DP website if you want to read what he has to say about assessment process.

Anonymous said...

What don't you understand? It's because actual subsequent sales often have occurred at levels of previous assessments. But yes it’s just another indicator. I never cited it as the Big One. Why are you obsessed about it? Other than his saying the obvious—"The economy, a lot of times, drives the amount of appeals”—what does Barbour say that's relevant to me as a potential buyer seeking a well-priced home in a generally overpriced market but with a rising tide of people who have to sell?