Archive for the 'Market Statistics' Category
2011 Average Prices and Sales Mix
Warning: What follows is quite dorktacular. You have been warned.
Last week we looked at the really big picture transactions data for Hartford County in 2011. The main concern we had with how the numbers turned out was that the average single-family home price appeared to rise slightly from 2010 to 2011, which was not what we saw in the market on a house by house basis.
There is no easy way to track the price trends in a region because every house is unique. Repeat sales is the best method I know of, but it’s too hard for us to use. Anyway, we were talking averages in the post. Our hypothesis as to why the average might be misleading in this case is that averages can be influenced by a change in the mix of homes that sold between the two years. They are especially susceptible to sales of expensive homes since one million dollar property contributes as much to the total sales volume as five $200,000 homes.
The first step we took to test our hypothesis was to look at how the mix of sales changed between the two years.
The chart shows that the number of sales increased in the sub-$100,000 price band and also in all three price bands above $500,000. It also shows that the $100,000s remained almost exactly the same. Finally, the number of deals in the $200,000s fell by about 20%, while both the $300,000s and $400,000s fell by about 12%. The chart confirms our anecdotal observation that there is was more interest in high end properties in 2011, but doesn’t address our hypothesis in a convincing manner.
What if we plotted the total sales volume for each price band instead of the number of deals? That would put each of the price points on equal footing in terms of their contribution to the average.
This chart shows that the homes that sold for less than $100,000 matter very little in the average. But otherwise the chart is not conclusive about whether the average remained the same due to prices holding steady between the two years or some other reason.
Maybe we should just throw in the towel on the average as a proxy for home prices and move over to the median. Between 2010 and 2011 the median single-family home price in Hartford County fell 3.3% from $230,000 to $222,500.
Or we can just trust our observations of the market … home prices fell in 2011.
2011 Closed Stats From 50,000 Feet
Last year we gathered up all the Hartford County residential transactions since the beginning of the CTMLS in 2000 and showed how the very high level trends had changed over 10 years. Today we update those charts with the data from 2011. As always, the CTMLS is deemed reliable but not guaranteed.
Observations
The total number of single-family home transactions fell again in 2011, decreasing about 8% from the 2010 total. With the latest data point, activity for this type of property is about 41% off the 2005 peak in Hartford County. Last year we wondered whether we had seen a bottom in the number of deals – clearly 2010 was not the bottom.
As sales volume fell, showing a decrease in overall demand, the average sales price was apparently not changed. We don’t put a lot of faith in average prices because they are strongly influenced by the mix of homes that sold in a particular year, so we think something else is going on.
Our anecdotal experience is that home prices are still falling in all the towns and markets in which we do business. We also see more interest in higher priced homes, which will tend to inflate the average, and believe that’s why the average sale price edged up slightly. We’ll work on building the case to either prove or refute this hypothesis and share that result too.
Big picture analysis like this is never especially satisfying since we usually end up with more questions than answers. What are you guys seeing out there as you follow the markets? Michael called 2011 almost perfectly in the comments from last year’s post, so we clearly have knowledgeable readers!
Also, we have this data broken down by every single town in Hartford County. If you’re interested in a specific town, email us and we’ll send you the charts.
December Contracts: Making Up For November
December single-family contracts came in at 357 for Hartford County, which was slightly higher that the number of deals that came together in November.
December is traditionally the slowest month of the year, so having it outpace any other month is a bit of a surprise. We think that the usually large snow storm, which was felt through the beginning of November, worked to push some business into the year’s final month.
This December also showed an uptick in activity compared to December of 2010. The number of homes that went under contract this past month is nearly 10% higher than the total from the previous year. It’s difficult to know how much of this observation can also be attributed to the snow storm. Our feeling is that it is not a result that we should read too much meaning into.
Results were well distributed at the town level, though not over as extreme a range as we have seen in previous months. More interesting is that the number of homes actively for sale has come down to about 6.6 months worth of inventory. It was at 7.3 months in the November report, and peaked at 8.8 months in the June report.
Inventory levels should be lower at the beginning of the year. Many sellers take their properties off the market over the holidays so they don’t have to worry about keeping their home in “show condition” and accommodating visits from potential buyers. New listings will begin to come on the market at a steady pace, and the pace will increase as we get through the winter and closer to the traditional spring real estate season.
We’re working on our 2012 real estate predictions, and will hope to have some more analysis of 2011 available in the coming weeks.
November Contracts: Winter in New England
November is traditionally the time of year when real estate activity begins to slow. We did see a modest fall-off in deals, but it was not a big surprise, and was an average of recent results. Last year November was more in line with October than December, while in 2009 it was an even larger decrease from October than we’re seeing right now.
Perhaps winter arrived a little early this year in Greater Hartford; we all know that the snow did. Widespread power outages beginning with the storm on October 29th impacted the real estate market for the entire first week of November. Buyers were focused on other priorities and sellers’ homes and properties we in no condition to show, never mind impress. There were few, if any, showings until the weekend of 11/5 when brave buyers began to tour unlit homes with their flashlights. With the storm at the beginning of November, and Thanksgiving at the end, we were lucky to have two solid weeks during the month for real estate.
Switching over to the sell side of the equation, it feels like there is very little new inventory entering the market right now. It can be weeks between interesting new listings that match our buyers’ search criteria. November is not traditionally a popular time to put a home on the market, but it may be a good strategy in some of the more active submarkets where there are buyers actively looking. If a home shows very well, and is properly priced versus the competition (mostly listings that didn’t sell during the fall), then it should generate interest.
Homes that have been on a long time without selling probably are best served by coming off the market for a few months over the holidays. Buyers tend to tune them out over time, so laying low for a little while can work in the sellers’ favor. When sellers relist in the spring there will (hopefully) be lots of new people in the buyer pool who will be excited to go see the home for the first time.
Here are the town-by-town stats for the month of November – they are even more scattered than usual.
West Hartford Revaluation 2011 – Mill Rate Estimate
Last Tuesday we wrote about the West Hartford revaluation, focusing on the informal hearings that allow individual property owners to challenge the market values that they received in the mail from the Town.
Today we turn our attention to analyzing the big picture results of the revaluation. Amanda Falcone’s piece in the Thursday’s Hartford Courant quotes West Hartford Assessor Joseph Dakers Sr. as saying the new market values will “likely cause the town’s grand list to decrease by 5.6%, or about $316 million.”
Based on that statement, and a number of additional steady state assumptions detailed below, we’re projecting the new mill rate to end up somewhere between 33 and 34 mills. If accurate, it would represent about a 2% average increase in the tax burden on real property owners, and a 15% decrease taxes on personal property (business equipment) and motor vehicles.
We would expect individual property owners to experience much larger swings in their tax burdens depending on their specific properties. Some will experience larger increases, while others will see their taxes go down. It will all depend on how their individual properties were assessed during each of the two previous revaluations. A ballpark figure for future tax burden can be calculated using the following formula:
Our mill rate is a very rough estimate, but we feel it is an accurate depiction of what is likely to happen if the proposed market values hold and basically everything else stays the same. It analyzes the impact of the revaluation without addressing any other factors that may impact the Town budget.
Please feel free to check our work, which is shown below in detail, and post your thoughts in the comments.
Step 1: Interpreting the Data
The whole calculation is based on the Town Assessor’s statement that $316 million is about 5.6% of Grand List 2010. So:
The context of the quote doesn’t specify exactly what the Assessor means when he says “Grand List.” Is he talking about the market values, Gross Assessment (70% of market value), or the Net Assessment (after all exemptions are subtracted out)? Is it for only Real Property or does it include Personal Property and Motor Vehicles?
Last year I worked with the Assessor a bit when Grand List 2010 was released, modeling the whole system. In comparing the “Grand List” number he seems to be working with now to that spreadsheet, my conclusion is that he is talking about the total Gross Assessment for Real Property. Since the revaluation is focused exclusively on Real Property, this seems like a reasonable conclusion. Below is a summary of the taxes generated last year by Grand List 2010 (Note: Gross Assessment and Exemptions sourced from a report emailed to me by the Town Assessor in February 2010).
These calculations show that the Town would have sent out property tax bills totaling about $197 million. Page F-2 of the 2011-2012 Annual Town Budget shows a table summarizing the Town’s revenues, discussing property taxes, and showing the tax collection rate. It shows Current Property Taxes in the Fiscal Year 2012 Adopted Budget as $195,496,802. So our calculation of the billings is quite close to what the Town expected to receive – a good sign. Our calculation gets even closer to the target when we include their assumed 99% tax collection rate.
Step 2: Defining Assumptions
The agreement of our calculation with the Town Assessor’s quote and the expected revenue provide enough confidence to move on to the next stage of the calculation. But before we can run more numbers, we need to be explicit about our assumptions. Here are the five main assumptions in our forward looking analysis and projections.
1. The Town Assessor was properly quoted in the Courant, and we have properly interpreted what he said. The discussion above provides two independent points of collaboration, which makes us feel good.
2. Personal Property and Motor Vehicle Gross Assessments remain unchanged.
3. Town revenue raised from Property Taxes remains unchanged.
4. All phase-in exemptions are eliminated. We’ve discussed the frozen phase-in elsewhere and will skip over it this time. It’s important, but is not the focus of this analysis.
5. All “normal” exemptions remain unchanged.
Step 3: Projecting Grand List 2011
Now we’re ready to update the table from above to reflect our assumptions for Grand List 2011.
First we calculated the new Gross Assessment for Real Property by subtracting $316 million. Next, we eliminated the Phase-In Exemptions, so everyone is taxed based on the market values determined by this revaluation. Finally, we optimized the Mill Rate so that the total Tax Revenue exactly equals the previous table.
The resulting 33.67 mill rate is more precise that we can reasonably calculate given the rough nature of this estimate, so at the top of the story we said that it would end up somewhere between 33 and 34.
So there it is, our attempt to ballpark the West Hartford mill rate for the tax year starting in July 2012. We have no doubt that there will be factors outside of the revaluation that will impact the Town, and therefore the budget. However, we hope this provides a starting point for understanding how the revaluation will impact property tax revenue.
Again, please feel free to post questions, concerns, and thoughts in the comments section.
Related Posts
West Hartford Revaluation 2011 – Informal Hearings
West Hartford Revaluation
West Hartford Revaluation, Part II
Property Taxes and Revaluations