If home prices are up 10% from last year, then why didn't my house appraise for 10% more?

Recently, this question was asked of us, "If home prices are up 10% from last year, then why didn't my house appraise for 10% more?   So we thought this might be a good topic to address.

Currently in many major markets throughout the U.S. there is significant home price appreciation. Does that mean my every house in the U.S. has appreciated in value?  If prices are up 5% in my market from last year does that mean my house is now worth 5% more? Maybe and maybe not. When looking at market trends and data, we must always know the perspective from which we are viewing.  

Perspective

Are you looking at national market trends, regional trends, or the trends applicable to your immediate market or neighborhood?  It is great to take a look at all of the trends.  We can start with the national trends and then "zoom in" to where our property is actually located. 

Here is an illustration: 

National Trends: 

Here are the current National Housing Market Trends for April from Realtor.com. 

Realtor.com

Currently, throughout the US the median list price is up from last year and the month before. Inventory is down and the number of listings is up from last year.  This is the distant view.  It gives us some information but let's zoom in a bit more. 

Regional Trends: 

Data from the NTREIS MLS Database 

Here are sales within the entire North Texas region.  The median sale price is up 8.48% from last year and up 1.37% from the month before.   This is certainly higher than the national trends.  Now we'll take a look at a county in North Texas. 

Data from the NTREIS MLS Database

Here are the sales within the Denton County market.  The April median sale price is up 3.48% from last April but is down from the prior month 5.68%.  Now we will look even closer at the city of Denton within Denton County. 

Data from the NTREIS MLS Database

When we look at just the city of Denton we find that the median sale price is up 12.37% from last year but down slightly from the prior month 1.31%.  Our final zoom for this illustration will be a specific subdivision located in the City of Denton. 

Data from the NTREIS MLS Database

When looking at the specific market of Northwood subdivision, you can see that there are fewer sales and that the market fluctuations are greater in this smaller market. This market certainly looks much different.  The median sale price in this market is actually down 26.58% from last year, up 4.25% from the month prior.  

What does this tell us? 

*As you can see, depending on which market the amount of price appreciation was different. National Median Sale price was up 3.1%; Regional North Texas Median Sale price was up 8.48%; Denton County Median Sale price was up 3.48%; City of Denton Median Sale price was up 12.37%; finally Northwood Subdivision was down 26.58%.  Overall trends in all markets were up with the exception of the smaller market of Northwood.  Because there are fewer sales, the market trends will fluctuate in the smaller markets because just a few sales high or low have a greater impact on the median sale price. 

*The submarket in which your property is located will be the greater determining factor for the value.  

*Your property will also vary within its submarket.  If your property has not had any updates in 15 years but most of the sales of homes within your submarket have, then your property will not have the same value as the majority of homes within your submarket.  The same holds true if your property has updates or upgrades and the majority of homes in your submarket does not then your property will have more value.  Is your property an over improvement?  An under improvement?  Is your property located along a busy street? Does it have a water view?   There are many factors that will impact the value of your specific property.  

*Note for appraisers in an increasing market,  when markets are appreciating, pending sales will be important along with the closed sales. Here is a great post from Ryan Lundquist addressing this: 4 Things to Remember about Increasing Values and Low Inventory

*A real estate professional, such as an appraiser or realtor, who is knowledgeable in your particular submarket can help you know the market trends for your specific property. 

The biggest takeaway is to know that while knowing the market trends, both national and regional, is certainly helpful, each market and submarket is different.   

Here are some helpful links:

RealtyTrac- US Market Trends

Realtor.com- Real Estate Trends 

Case-Shiller- Home Price Index 

John Wake- Real Estate Decoded 

Ryan Lundquist- Sacramento Appraisal Blog- Market Trends 

I hope this helps answer the question as why your home may appraiser lower or higher than national or regional market trends.  If you have any questions about market trends or real estate appraisals please contact us at www.dwslaterco.com.

Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use.  This information is NOT intended to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or other potential real estate or non-real estate purpose.  If you’d like to obtain additional information or order an appraisal for your specific needs, please contact us at www.dwslaterco.com