Trends

Value of Tax Value

The City of Charlottesville released their 2013 tax assessments this week. Mailings have been sent to home owners, and the web site has been updated to reflect the changes.

Assessments cause all kinds of a ruckus. There is an erroneous perception that prices should instantly adjust to match these new numbers. Nothing could be further from the truth. Reality is, this is the City’s best effort to meet state requirements to estimate the values of the parcels in the city. No one in the assessors office would argue they are perfect. I won’t go so far as to say they are even close in many cases.

There are, however, certain times when assessments should be darn easy. Like the day a home sells. If a home sells for $745,000 after being offered on the open market, and the transaction is indeed an arms length transaction, it makes total sense that the City would be able to assess that house without really thinking about it. The value at which a seller is willing to sell and a buyer is willing to buy is $745,000. That is the definition of market value. And that’s why it’s truly bizarre to see the assessment today on this house at $381,000. (Assessing this home at 51.2% of its market value.)

From the City assessors web site:

Real Estate Assessments are required by the Codes of Virginia and the City of Charlottesville to be at 100% of fair market value.  Assessments are made each year by the City Assessor’s Office and are effective January 1.

and

As required, the City’s assessment is an estimate of fair market value as of January 1 each year, based on property sales for the previous calendar year.

The City breaks down the city into neighborhoods and then samples that neighborhood to determine what is happening price wise over the course of the year. Then, barring changes to a home, they apply a % change to all the houses in that neighborhood. There are certainly some places where there is more specific work being done, but in general, this is the practice. I pulled up a sampling of 10 homes in the neighborhood that is bounded by Rugby Road, Emmett Street, Westview Road, and Wayside Place. The tax assessments I pulled changed from -4.68% to -4.7%. You can’t tell me that is an accident. So, the question is, how accurate is this practice. I would say we can bicker about whether -4.7% is the correct amount, but in general, I agree with the practice. If my neighbor’s home goes up 5% or down 3%, it is fairly accurate to say mine did too — UNLESS one of us has done improvements or allowed our house to waste away, in which case, they certainly change at different rates.

So, I focused on this one neighborhood and pulled every house that sold in 2012 to see if the new 2013 assessments were accurate for these homes. Nine homes total ranging in sales price from $367,000 to $1,250,000. How’d they do? Mixed Bag.

  • 938 Rosser Lane – Sold for $367,500 – Assessed for $443,600 – 121% of Sale Price
  • 901 Rosser Lane – Sold for $450,000 – Assessed for $449,200 – Spot On.
  • 1865 Field Road – Sold for $469,000 – Assessed for $511,900 – 109% of Sale Price
  • 1825 Edgewood Lane – Sold for $530,000 – Assessed for $734,100 – 139% of Sale Price — (NOTE: On the market for nearly a year)
  • 1859 Wayside Place – Sold for $706,000 – Assessed for $590,000 – 84% of Sale Price
  • 1863 Wayside Place – Sold for $745,000 – Assessed for $381,600 – 51% of Sale Price
  • 920 Rosser Lane – Sold for $753,000 – Assessed for $735,000 – 98% of Sale Price
  • 1872 Edgewood Lane – Sold for 890,000 – Assessed for $778,800 – 88% of Sale Price
  • 1820 Edgewood Lane – Sold for $1,250,000 – Assessed for $993,000 – 79% of Sale Price

Don’t get me wrong, I totally respect the fact that assessing homes that the City has likely never been in is extremely hard. And I respect the fact that the city has a good process. But no one can argue that a group of nine homes that all sold in the past year, arguably the easiest homes to assess, range in values compared to their sale price from 51% to 139% all in the same neighborhood is anything close to useful, valuable, or accurate.

My point here is not to say that all assessments are bad, or that we should be challenging every one. What I want people to realize is that basing listing and offering prices on City (or County) assessments is dangerous. While it can be a guide, and certainly should be considered, it has to be a single tool of many in pricing a home. We look at comps all day long. And the price you paid four years ago for your home will affect its sale price far more than the new City assessments. Prices in the Venable neighborhood did not go down 4.7% this week with the new assessments. The only thing that changed is that the taxes these home owners will pay went down by 4.7%.

 

 

Twelve Straight

February 1. Our January stats are far from being updated. We likely won’t have complete numbers for at least another week. But I had to peak anyway. And the numbers are remarkably positive so far. Keeping in mind that in the first week after a month, sales continue to be entered, and thus numbers only improve, we still have good and happy graphs to push out there.

Jan_2013_S_and_InvAbove are the sales and inventory numbers for Feb 2011 through Jan 2013. What this marks is the first time in a long time that we have seen 12 straight months of increased year-over-year sales growth and inventory reduction. While the January chart may look like sales are slightly down, that is a graphical anomaly I blame on shading. As of today, we have one more sale in detached homes in Jan 2013 than in Jan 2012. (Small, yes… but still growth.)

Over the last twelve months, the increase in sales reflects a more than 20% increase for City and Albemarle. A shift from 1002 to 1214 sales.

Compared that with the attached home market, where the twelve months ending yesterday look promising with a total increase in sales in the City and Albemarle of  roughly 9.7%. But that doesn’t really tell the whole story. When you look at month by month movement for the last 12 months, you find only 8 periods of year-over-year growth. In general, the overall trend is positive, but the trajectory is not nearly as clear. Additionally, the attached home inventory is 5% higher than it was at this time last year, and that brought the months of inventory up by a month and a half to 13.9 months.

The condo market moved similarly to the attached home market. Total sales over the year were up 14.9%, but that reflected only 8 months of year-over-year growth. (The condo market, however, is very small and thus new projects, lower prices on existing projects, etc… can sway the numbers months to month greatly.)

As a final quick note, Contract Written. In Jan 2011, we saw 71 contracts written on detached homes. In 2012, that number jumped to 102. This past month, we have records of 98 thus far. This is a big jump. The reason for this is that the way in which our MLS keeps records, many properties are Contingent for more than 2 weeks before they are moved to the Pending status. It is not until that time that they get a Contract Written Date that we can track. If you figure the average closing is 45 days, and 15 of those days are not accounted for, that is as much as 30% of deals. So, it is possibile that our 98 may go up to 120-130 before all is said an done. Of course it could go up to only 110… we can’t know. There are currently 126 properties under contract that do not have Contract Written dates. Not all from January to be sure.

No matter how you look at it, our numbers are still looking very strong, and the anecdotal evidence seen by real estate professionals supports that this is not likely to change in the short run.

2012 Year End Report

NestReportLogo

 

We released our 2012 Year End Report today, and it is a very different report from the past. The format will look familiar but the content seems almost opposite from the past.

Since 2009 when we first formed Nest and started putting out the region’s most complete and authoritative study of the market, we have looked at the Charlottesville area market with cautious optimism at best, and in many cases very clear concern for our future pricing. For the first time, we are very comfortable stating that all of our indicators are positive. Across almost every product type in almost every geographic part of our area, we are seeing growth: Growth in sales, Growth in Median Prices, Drops in Inventory, Drops in Days on Market. You name it, things look good.

We have said since 2009 that we wouldn’t feel comfortable until was saw 18 months of growth. Well, guess what? For 6 straight quarters, we have seen year-over-year growth in sales numbers.

SalesByQtr

 

This graph shows the total number of sales in Charlottesville City and Albemarle County going back to 2002. But the graph is for a full trailing 12 months, not individual quarters. It allows us to see the sales patterns while removing the seasonality of quarter-to-quarter changes. When you look at it on a visual basis, the trend becomes incredibly obvious. Here’s to a great 2013. Follow the link above and check out our whole report.

Screaming Quarter

Much talk has begun about what this year will hold. If the 4th quarter of 2012 is any indication, it should be a monster of a year. With all the data we process, I am getting more and more optimistic about what I see.

The 4th quarter of 2012 was the strongest ending of a year we have seen in Albemarle County since 2006. With 171 single family detached homes closing in the 4th quarter, it is the first time we have seen a sustained “reset” in the market. It brought the whole of 2012 year only 20 sales shy of our 2007 year. Still a far cry from the insane 2004 with 1256 detached sales, but certainly healthy.

The City was a similar story with the 4th quarter being the best 4th since 2005 and the year totals exceeding every year since 2007.

But what is great to see is not just a single month, but rather a sustained uptick in sales. This chart represents the total sales for both Charlottesville and Albemarle (Single Family Detached only) and displayed in a trailing four quarter method.

FourQtrSalesAccording to this trend line, we have seen improved quarters since Q2 of 2011. That certainly is not when we bottomed out in terms of price, but the sales numbers have significantly increased every quarter since then. And happily, we are not back to our Bubble Period numbers, but we are moving along strong. In fact, the sales for 2012 are above the average since the start of 2001, and that includes bubble years.

We will keep the data churning as we process our year end info, so keep checking in.

 

Unemployment Revisited

I first addressed unemployment in April of 2008 as being the best harbinger of a declining market in Charlottesville. At the time, we had local unemployment of 2.5%. The market, especially in the City, was still moving pretty well. Days on market had degraded substantially, but prices were actually up a (now stunning) 7.5% from the year prior while the actual deal volume had increased nearly 10% from the first quarter of 2007. At a time when the market was being called stable by many, I called a coming decline. Fourteen months later, Charlottesville had unemployment of 6.4%.

So, now, as we see definite signs of an improving market in the close of 2012, what other larger macroeconomic indicators can we look to? Well, unemployment would be my first pick.

 

Jan2013UnemploymentThere is no question that purchasing decisions for big ticket items are determined in large part by consumer confidence. There is no large ticket item for which this is true more than homes. Who would buy a home when they don’t feel comfortable that they will have a job in 9 months?

So, where is Charlottesville in all this mix? Our current rate of 4.5% looks pretty good, whether compared to the Virginia rate of 5.6% or the National rate of 7.8%. When you think that the national rate has not been lower since January of 2009, it all looks pretty good.

But go back to April of 2008 and you find Charlottesville at 2.5%. Look at the graph above and notice that Charlottesville is always significantly below the national curve, and most often below the Virginia number as well. Just because we compare well against the National numbers doesn’t give me comfort. Back in 2008, we were frequently in the top 15 cities in the country (#13 at the time of the above cited article.) For Charlottesville to be back at #13 right now, we would need to find 551 jobs for the 5,100 unemployed people in our MSA. That is a TREMENDOUS number. To get us back to 2.5% unemployment, we need businesses to create more than 2,250 jobs. And that needs to be done without bringing a single employee in from out of town to fill those jobs.

The good news is that we don’t need to get to 2.5% to be healthy. In fact, most economists would say that any unemployment rate below 5% is pretty darn healthy. The question is, does having a National unemployment rate hovering over 7.5% bring confidence? I don’t think so. If we see the national number in the 6’s, even the high 6’s, and Charlottesville can stay in the 4’s, we will see a high consumer confidence in our area. At that in turn, should provide some stability.

Right now, the market is moving quickly. City properties are getting sold in very short order in terms of Days on Market. But the question remains, are these buyers looking to take advantage of a perceived bottom of the market curve, or is this a sustained return to the market?

Back to top

Twitter links powered by Tweet This v1.8.3, a WordPress plugin for Twitter.