Does assessed value have any bearing on market value?

The short answer is no.

We measured data from the South Central Wisconsin MLS to take a closer look at the relationship between the assessed value and the selling price for homes in Madison. The results show that during the years 2000 to 2005, roughly 90% of all Madison homes sold for above the assessed value. However, this relationship started to change in 2006, and in 2007 only 56% of all Madison homes sold for above the assessed value.

The bar chart below shows how the relationship between assessed value and market value has changed over time. The blue bar represents the percent of Madison homes that sold for below the assessed value. The purple bar represents the percent of Madison homes that sold for above the assessed value.

We drilled deeper into the 2007 data for Madison homes and uncovered the following:

• 26% of all homes sold for a price that was at least $10,000 lower than the assessed value.
• 44% of all homes sold for a price that was within $10,000 (above or below) of the assessed value.
• 32% of all homes sold for a price that was at least $10,000 above the assessed value.
  
  
  
  

What does this data mean for you?

If you're selling your home, you can't rely on the assessed value as a reliable measure of market value. You or your real estate professional need to research the market in your neighborhood to establish the proper market price.

If you're buying a home, realize a list price above the assessed value doesn't mean a home is over-priced, and a list price below the assessed value doesn't mean a home is priced at a good value. Same as above, you or your real estate professional need to research the market in your area of interest to determine the market value of a particular home.

For more information, read our articles on market value versus assessed value and pricing your home, both at DaneCountyMarket.com.

Five themes in this year's Dane County real estate market

Here are five big themes in this year's Dane County real estate market:

1. Inventory is lower this year compared to last year.
2. Home sales and condo sales are also lower.
3. Foreclosures are increasing.
4. Home prices and condo prices are tracking near last year's levels.
5. The market for homes and condos varies significantly by location.

National and Dane County real estate statistics for the month of May

The National Association of Realtors (NAR) has released its real estate statistics for the month of May. Here's a quick comparison of how the national numbers compare to the Dane County numbers:

Change in sales (May 2008 vs May 2007)

• National sales down 15.9%
• Dane County sales down 19%

Change in median price (May 2008 vs May 2007)

• National median price down 6.3%
• Dane county median price up 1.3%

Note NAR combines its data for homes and condos for all of its statistical reports. We prefer to separate home and condo data so we can track how these two markets change with the times. You'll find all of our Dane County preliminary real estate statistics for the month of May here, where we break down the numbers for homes and condos, and provide year-to-date as well as monthly comparisons.

Our full report for the month of May will be posted here in early July.

Read beyond the headlines

Thursday's news releases by MarketWatch, CNBC, and the National Association of Realtors all include headlines saying that national home sales increased in May. What the headlines don't say is that the increase in sales was measured by comparing the month of May to the month of April.

If you dig deeper into the releases you'll read that the number of national home sales in May 2008 was actually 15.9% lower than the number reported in May of 2007. This is the better way to measure the change in sales, due to the seasonality of real estate.

All real estate is seasonal, and when it comes to homes sold, the market is as predictable as the seasons. Look at this graph that shows the number of Dane County single family homes sold each month dating back to January of 2005. You'll see June is always the month with the highest number of closings; January is always the month with the lowest. You'll also see that May always has more closings than April.

For more information on how the market varies with the seasons, visit the real estate trends page at DaneCountyMarket.com.

The first two rules in real estate

Rule #1: All real estate is local.

Let's use data from our own Dane County real estate market to look at how the market can vary from one location to the next.

Months of inventory is a great measure that uses supply (# of listings) and demand (# of listings recently sold) to approximate the number of months needed to absorb the current listings on the market. As you'll see below the months of single family home inventory within Dane County varies significantly by location. Note: this data excludes condos (you'll find more info on condos later in this post).

The average months of inventory for all of Dane County is 8.7 months, with the Madison West, Madison East, Verona and Cottage Grove locations all faring well relative to the county as a whole. On the other side of the spectrum six suburban communities - Sun Prairie, Fitchburg, Stoughton, McFarland, Oregon, Mount Horeb - all have at least 11 months of inventory.

The data is very telling when you take a closer look at the months of inventory for the city of Madison. As you'll see below, four different MLS locations on the west side of Madison all have fewer than 6 months of inventory. All of these locations consist of older neighborhoods that offer relatively easy access to the University and Madison's downtown.

On Madison's east side, 3 different MLS locations have under 6 months of inventory. All of these locations consist of well-established neighborhoods located along or near the Atwood Avenue corridor.

Rule #2: The market varies by property type.

Take a look at the months of inventory for the Dane County condo market. The average for all of Dane County is 16.9 months, almost double the 8.7 months for the Dane County single family home market. The numbers for the the condo market include some big swings. Middleton and Cottage Grove have 12 or fewer months of inventory. Stoughton, Verona, Mount Horeb, Oregon and Monona all have at least 25 months of inventory.

On the west side of Madison, you'll also see some big swings in the months of inventory by MLS location. And you'll see some big swings by MLS location on Madison's east side.

The Dane County condo market has some very large inventory levels due a ton of new construction that has entered the market in the last three years. In some locations, where the historical demand for condos has been low, the data suggests it will be a matter of years (not months) before the market is able to digest all of the condos on the market.

On the flip side, there are locations within the Dane County single family home market where the months of inventory are actually quite low.

Related Reading:

• A recent article by the Wisconsin State Journal on the months of inventory by location
• Historical trending of active listings at DaneCountyMarket.com
• Months of inventory historical trending at DaneCountyMarket.com
• Monthly updates on how the months of inventory vary by location for homes and condos (DaneCountyMarket.com)

Why the "sold to list" price ratio is deceiving

Here's a Madison home that sold on April 5th.



The list price at the time of the sale was $219,900. The sold price was also $219,900. That equates to a "sold to list" ratio of 100%.

Not bad.

But there's more to the story...

This listing was originally priced at $247,900. Then it underwent a series of price reductions - from $247,900 to $239,900 to $229,900 to $219,900.

The sold price ended up at just 89% of the original price for this listing ($219,900/$247,900 = 89%).

Unfortunately the "sold to list" price statistic is not the measure that it appears to be because it is based solely on the most recent list price. It doesn't use the original price for the listing (or for that matter the original price of any previously expired listing).

Whether we are in a seller's market or a buyer's market, the "sold to list" price ratio for the market as a whole will always be around 97%. That's because homes tend to sell when they are priced right, no matter the market.

Some sellers select a competitive list price at the very beginning of their listing. Others drop their price one or more times before they reach the right price point. Either way, most sellers usually find the right price, and when they do, they tend to end up accepting an offer that is reasonably close to the list.

Ten photos, ten reasons not to buy

All of these photos are from active listings on the South Central Wisconsin MLS. Do any of these make you want to buy?

I didn't think so...

You can read more about why quality photos matter here.

Don't let this happen to your listing

Have you seen this before?



Unfortunately this is how some listings make their debut on the internet. If you're planning to list your home, make sure your listing agent is planning to include photos when your home hits the MLS.

These days many buyers receive instant email notifications as soon as homes matching their criteria hit the MLS. First impressions matter, and you don't want buyers to see this when they view your listing on the internet.

Why quality photos play a vital role in every good marketing plan

Times have changed. Over 90% of all real estate consumers now use the internet as part of their home search. This means many homes now either "get cut" or "make the cut" based on their online appearance. Poor photos drive buyers away, while great photos can generate loads of showings.

For example:

Check out these photos from a listing on the west side of Madison. This property spent a total of 11 months on the market, back in 2004 when the market was hot.

Now check out these photos. These photos are for the same home, for a listing 4 years later. Shawn Kriewaldt and I hired a professional photographer as part of our marketing plan for this listing. These photos helped to generate 14 showings and 2 offers in 14 days. The sellers accepted an offer on the 17th day and will be closing later this month. Not bad for a slow market.

Notice how the rooms for each photo in this listing appear brighter and more spacious. Our photographer uses a wide angle lens and adjusts for lighting to give each photo maximum impact.

Hiring a professional photographer increases our financial investment in our marketing plans, but it's worth every penny. First, the costs are relatively inexpensive. Second, the benefits are tremendous. Professional photos help our homes to sell more quickly, and our clients love the results.

You'll notice the above listing also benefited from new paint and new carpeting, as well as the services of an interior designer (which we also included as part of our marketing plan). We'll cover staging ideas in future posts.

Dane County Condo Price Trends

Much has been written about the rise in Dane County condo inventory and its effect on the market. However, condo prices have remained remarkably stable given the inventory growth over the last few years.

Looking back to the year 2000, the median price trend for Dane County condos was positive for every year in the decade through the year 2006. In the year 2000, the median Dane County condo price was $124,400. By 2006, the median price had grown to $167,900. Price growth fell by .3% in 2007, when the median price was $167,434.


Through April 30th of this year, the median price for a Dane County condo is actually 3% higher than the year-to-date price from the same time period last year.

Despite this year's growth in the median condo price, buyers hold all of the leverage in the current market. Many sellers are offering large incentive packages these days, and many buyers are able to negotiate great purchase terms. We'll cover buyer leverage and seller incentives in our next post.

For more on the latest Dane County condo price trends, visit our monthly report at DaneCountyMarket.com.

Dane County Single Family Home Price Trends

The Dane County real estate market has experienced a cooling over the last two years, following the overall national trend. Fortunately the effects on our local market have been much less severe than in many other parts of the country. This is especially true when it comes to price trends.

The median price trend for Dane County homes (excluding condos) was positive for the entire decade through the year 2007. In the year 2000, the median Dane County home price was $154,500. By 2007, the median price jumped to $232,000. Price growth was positive every year during the first 8 years of the decade but slowed to .9% in 2007.

The year-to-date median price through the month of April (excluding condos) is lower this year compared to the same time period in 2007. Thus far, the Dane County median price for a single family home is 2.2% lower than the median price from last year.

While many areas around the country have experienced double digit price declines, our local market has weathered the storm fairly well. Of course buyers by and large hold all of the leverage right now. We'll cover how buyers are using this leverage in a future post. For our next post, we'll cover the most recent price trends for Dane County condos.

For more information on Dane County single family home price trends and statistics, visit our monthly price report at DaneCountyMarket.com

Dane County Real Estate Trends - Total Days on Market Experience

By analyzing data from the South Central Wisconsin MLS, we know how often listings sell versus expire. We also know the average Days on Market for those listings that sell and those that expire.

When we combine these two data sets, we can approximate the Total Days on Market Experience for the average Dane County home and Dane County condo seller. In other words, this measure approximates the total required marketing time for the average seller by taking into account how often homes and condos need to be "re-listed" after a previous listing had expired.

Looking at Dane County homes, the Total Days on Market Experience for the average seller increased from 89 days (2.9 months) in 2004 to 210 days (6.9 months) in 2007.

Looking at Dane County condos, the Total Days on Market Experience for the average seller increased from 141 days (4.6 months) in 2004 to 502 days (16.5 months) in 2007.

Keep in mind these numbers represent an average. Plenty of properties end up selling more quickly than the average number of days shown above. And quite a few end up taking longer to sell.

These numbers also show the effect that the rise in condo inventory has had on the market. Dane County condo sellers will need to aggressively compete for their closings as the market works to digest the excess of condo inventory.

Dane County Days on Market are Increasing

In recent posts we've covered how some listings sell and some listings expire. We've also covered how a greater percentage of listings are expiring in today's market than in years past.

Two other trends are at work which are affecting the required marketing time for the average Dane County seller:

1. A listing that sells in the current market tends to require more marketing time than a listing that sold in years past.


2. A listing that expires in today's market tends to sit on the market for a longer period of time than a listing that expired in years past.

Looking at Dane County homes, the average Days on Market for a sold listing jumped from 48 days in 2004 to 74 days in 2007. During that same time period, the average Days on Market for a listing that expired jumped from 117 days to 149 days. This year the Dane County Days on Market for sold and expired listings continue to trend at historically high levels. You can get the details by viewing our monthly Single Family Home Days on Market Report.

The trend toward longer sold and expired listings has been much more significant in the Dane County condo market. The average Days on Market for a sold listing jumped from 93 days in 2004 to 146 days in 2007. Meanwhile, the average Days on Market for an expired listing jumped from 157 days in 2004 to 241 days in 2007. This year's Days on Market numbers continue to trend at high levels. You'll find more details in our monthly Dane County Condo Days on Market Report.

The trend toward a growing Days on Market for expired listings is a clear indication that sellers and real estate brokerages are adjusting their expectations of the market. Listing contracts these days tend to allow for more marketing time than in years past.

Of course there are many other ways that a seller can adjust to the market, all of which involve a shift toward more of a business mindset. How a seller presents, prices and markets his home all go a long way toward determining whether or not it will "sit or sell".

Why "Days on Market" can be Misleading

Be careful if you're reviewing a market analysis that shows the Days on Market for recent sales in your area. Why? Because the Days on Market numbers that come from the MLS apply to listings, not properties.

The problem with this is that many properties in the current market will be relisted - sometimes several times - before the final listing sells the home. Take a look at the MLS statistics for the 3 condos below. The first condo shows a Days on Market of 5 days, the second unit shows a Days on Market of 79 days, and the third unit shows a Days on Market of 50 days.

What you can't tell by looking at the MLS summary above is that property three (3416 Valley Ridge) went through two expired listings before the third listing sold the property. When you add up the Days on Market numbers for all three listings, the total is 316 days, not 50.

If you want to know the true picture for how long it took to successfully market a particular home, you need to know the history of any listings that expired before the final listing sold the property.

This is why we track both the number of sold and the number of expired listings for Dane County homes and Dane County condos, as well as Dane County listing success rates, in our coverage of the local real estate market. You'll find these statistics on the Real Estate Trends page at DaneCountyMarket.com.

We also track the Days on Market trends for both sold and expired listings. Our research shows that when listings sell, they tend to take longer to sell than listings from previous years. The Days on Market for expired listings has also increased from the levels of prior years. We'll cover this topic in more detail in our next post.