Appraisers are supposed to develop and analyze data to determine the marketing trends for a given appraisal valuation assignment.
Most appraisers, even corporate appraisers, do not perform the in-depth marketing trends analysis of an overall market area that is necessary to really comprehend the changes.
Taking Fort Worth as an example, the tax assessor increased property taxes in some areas over 20% in 2018. The problem facing tax assessors and independent appraisers alike is that the real estate market in general has experienced value increases over the last 10 or so years. Many appraisers have only been in the profession this past decade and have never dealt with a market change or price decreases. Homeowners are going to probably see value declines in 2020.
While I only took the overall Fort Worth city sales data, with all of its different neighborhoods and sub markets, some interesting trends can already be seen.
First, I split the data into 5 categories based on the square footage of homes that sold in 2019.
What I found (see chart) is that homes under 1000sf (typically older homes that appeal to first time buyers) had the highest increases in value at 11.6%, while homes over 3,000sf actually show a decline in median prices.
Most new home construction of the last 10 years in Fort Worth falls into the 2000 or more square feet size homes, and within the range of declining home prices. This indicates a significant slow down in the real estate prices overall from just 2 years ago.
[What is median price? It is the mid-point of a range of numbers. So, in the chart below, a median price of $215,000 means that half of the homes sold above this price and half sold below it within the 1501-2000sf home size.]
The result is going to be a significant slow down or decrease in market value, in spite of lower interest rates. New homes may still compete due to their appeal, but home buyers should be cautioned that in the size (3000+ sf) and median price range ($379,000) prices will have the most depreciation.
Think of it as the concept that as soon as you drive a new car off the lot it loses value. The same is true for new home construction, and if buying in that range where values have started to decline your home will be worth less in a few months as it competes against other new homes.
Be sure to get a comprehensive and accurate appraisal of your home for tax appeals or when listing your home. For purchases and refinances, your lender will order the appraisal and select an appraiser, so appraisal's accuracy will depend on the appraiser’s knowledge, experience and thoroughness.
Whatever the situation is, 2020 may be the year we begin to see a slip on property values.