Jack's New Hampshire Real Estate Blog

An Easy Way to Determine Price Appreciation/Depreciation
October 14th, 2008 8:20 PM

People always ask me “is the market going up or down”. I usually talk in very general terms as each market is a little different. However, here is a simple way to determine the “direction” of prices. In order to determine whether properties are going up or down and to what degree, sale comparables must be closely analyzed to extract the price appreciation or depreciation. You can hire an appraiser or a very experienced broker, but here is a “short cut” that will help.

I prescribe to the theory that all boats rise in high tide (and lower in low tide). If houses in Bedford NH are decreasing, guess what, condos in Bedford are too. If Lakefront Condos on Lake Winnipesaukee are increasing in value, then so are single family houses. If single family homes in Manchester are going down, then prices of 2-family apartment buildings in Manchester will go down too. Certainly, there are exceptions, but as a general rule, this does hold through. Based on this premise, I like to compare sales of nearly identical properties. So where do I find them? Well, if we were in California with tract housing we could use lots of sales data of similar houses. Since, most houses in New Hampshire have enough differences to make the job tough, I like to use condominiums. What I recommend is choosing condominium projects that have lots of sales and are considered “staple” properties. I might recommend “Ridgewood” in Bedford, “Fox Hollow” and “Northbrook” in Manchester or “Society Hill” in Merrimack. Then I recommend having a broker or appraiser (oh..I wonder who you could get to do this for you?...lol) to email you 2 sets of comps. One from a year ago, and one fairly recent. By comparing the difference (if any) in prices in a few complexes, it will give you a general idea what direction prices have moved to. The other way is to analyze the supply of the condos. From the same broker, find out how many sales there were in the last 12 months and how many are currently listed on the market. Do this for all complexes. Then you will figure out how much “supply” there is. You do this by taking the number of annual sales and dividing it by 12. Then divide that number into the amount of active listings. This will give you the supply. Here is an example:

24 sales in a given complex over the last 12 months

16 currently on the market in that same complex.

24/12 = 2 sales per month. 16 active/2 sales per month = 8 month supply.

Do this for all complexes.

If supply is 3 months or less, it suggests a appreciating market (prices going up)

If supply is 3-6 months, it suggests a stable market and,

If supply is 6+ months, it suggests a depreciating market (prices going down).

Remember, as a quick (but reliable) way to get a sense for the direction of the market use condominiums as your bench mark.

*If you would like a print out of sales and listings just email me @ jacklavoie@comcast.net

 


Posted in:General
Posted by Jack Lavoie on October 14th, 2008 8:20 PMPost a Comment

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Nice job - very too the point and understandable, even I get it (lol) Chris

Posted by Chris on October 16th, 2008 9:04 AM

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