Accurate home pricing tricky
Multiple factors, such as lagging market recovery, underwater properties and disparities in MLS areas, make calculating values complex
Placitas is one of the Multiple Listing Service areas in the Albuquerque area that appears to have lagged in the very gradual recovery of detached single-family home values since the housing bubble burst.
The average sale price of a home in Placitas was $354,326 in 2014, 32 percent below its peak average price of $522,433 in 2006, according to the Greater Albuquerque Association of Realtors. For comparison, the average price for the entire metro area was $212,990 in 2014, 11.9 percent below the metrowide peak of $241,777 in 2007.
“Why are home values so low?” a homeowner and
Journal reader in Placitas asked in an email.
Her 2,700-square-foot home in Placitas, built in 1992, was valued at $625,000 by a group of Realtors during an open house in 2007, she said. Bear in mind that 2007 marked the final year of the housing bubble.
“We surmise that our home today would likely be listed at no more than $425,000 and sell for far less,” she said. “According to the current values out here, we are still way underwater with a mortgage of $485K.”
Placitas is not the only MLS area lagging in the recovery. The metro area is dotted with MLS areas, from the comparatively pricey to the comparatively cheap, where average home prices are running at 20 percent or more below their respective peaks.
Given that a home is the single biggest investment for the majority of families, this can be disheartening news for homeowners in areas that statistics tell us are lagging far behind the recovery.
As of the third quarter, in the Albuquerque area, nearly one out of every 10 homes with a mortgage was classified as “underwater,” meaning the home was worth less than the mortgage, real estate data and services provider CoreLogic reported last month.
But an underwater home has less to do with location in a given MLS area and more to do with the timing of the purchase, noted GAAR President Paul Wilson. If you bought your home at the peak of the bubble in 2006-07, when prices were highest, then you run a greater risk of being underwater, he said.
In addition to the timing of the home purchase, there are several other general considerations to keep in mind when looking at the relationship between housing data and the actual value of your own home.
First and foremost is that you really don’t know the value of your home until you negotiate an actual sale with a buyer, said Daniel Yu, a chartered financial analyst with REDW Stanley Financial Advisors.
“Unlike your investment portfolio where you can get updates every two minutes on your smartphone — a practice I don’t recommend for clients — your house simply doesn’t price every day,” he said “It’s illiquid.”
In other words, just like any other commodity or service, a house is only worth what someone will pay for it. Best-case scenario is the buyer sees the same value in the property as the seller.
As a way to get a feel for a home’s value, an owner can go to www.gaar.com and use the “find a home” tool to see asking prices for what’s currently on the market. The website also has the “market statistics” tool where an owner can access the monthly, quarterly and annual reports.
The quarterly sales reports have both average and median sale prices by MLS areas, while the annual reports have just the average sale prices for MLS areas. The average and median prices represent the grab bag of homes sold during the period of time of the report, said GAAR Executive Vice President Janice McCrary.
“Average and median (sale prices) have less to do with value and more to do with the mix of product sold,” she said. “It’s an indicator, nothing more.”
Some MLS areas are more homogenous in terms of housing stock than others, said Joe Gilmore, co-owner of Coldwell Banker Legacy. A more homogenous housing stock results in a narrower high-to-low price range, which makes average and median sale prices in those areas a little more useable, he said.
For example in the Paradise West MLS area, where the average price was $176,719 in 2014, the difference between the highest-priced and lowestpriced home for sale last week was $346,000. In the Northeast Heights MLS area, where the average price was $158,310 in 2014, the same range was $341,000.
The Placitas MLS area had a far more radical gap of $1.2 million, from a high of $1.3 million to a low of $93,000 for a repossessed home. A gap that wide can make it more difficult to “price to market” a home in Placitas compared to a home in the Paradise West or the NE Heights MLS areas, Gilmore said.
In addition, Placitas is a comparatively small submarket with 104 home sales in 2014, compared to 443 in Paradise West and 726 in the Northeast Heights. A couple dozen or so sales at either end of the price spectrum — say, $250,000 for the low and $800,000 for the high — can tip the area’s average price by close to $150,000 up or down.
Last year’s average price of $354,326 is the lowest for Placitas since at least 2006, but Gilmore, McCrary and Wilson all said the reason was almost certainly more sales activity at the low end of the area’s price spectrum. The most expensive home sold there in 2014 was $745,000, down from $850,000 the year before, Gilmore noted.
Last year’s 104 sales in Placitas are the most since at least 2006, the last year for which sales data by MLS area is available at gaar. com. Home sales and listing statistics indicate that Placitas’ housing market is tilted to a buyer’s advantage, Wilson said, but that’s the case in many MLS areas across Albuquerque area.