By Harriet Murray ● Cochran Real Estate ● September 2013
A general truism in real estate is the best indicator of house pricing is current homes sales.I have discovered recently how much more sophisticated this analysis has become since I first got into the business.
The original and simplest method to arrive at an expectation of a selling price is to take comparables as close as possible in area and use the characteristics of solds to make any adjustments for the difference in a proposed property price with sold ones to arrive at a indicated sale price range. Ampi *Vallarta, Nayarit, and Compostela now has its own multiple listing service database leased from Flex, a company in the United States supplying a database with technical help to hundreds of realtor associations in North America.
What we in our Ampi chapters can aspire to once we have the current system under our belt, is the advanced analysis of home values (all residential included in this generic term).
Leading the way in North America is the Canadian real estate industry which already uses systems closer to what we know as the Consumer Price Index. A consumer price index (CPI) measures changes in the price level and purchased by households. The CPI in the United States is defined by the Bureau of Labor Statistics “a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.” The annual percentage change in a CPI is used as a measure of inflation.
Canada has the MLS@Home Price Index which is similar to the CPI where the property estimated value is based on the combine value of its features, rather than the property itself. HPI provides a more accurate method of following price trends than traditional averages of home sales prices.
And there are other methods:
HPI is a weighted-sales index measuring average price changes in repeat sales or refinancing on the same properties in 363 metropolitan areas of the USA. This information is obtained by reviewing repeat mortgage transactions on single-family properties whose mortgages have been purchased or securitized by Fannie Mac or Freddie Mac since 1975.(If the current US administration dissolves these two federal agencies, this analysis tool as we know it will change.)
The Case-Shiller index prices are measured monthly and track repeat sales of homes by adjusting for the quality of homes sold, unlike simple averages.
The Core Logic HPI is a repeat-sales index which tracks increases and decreases in sale prices of the same homes over time, including single-family attached and detached. This system provides a multi-tier market evaluation of repeat sales transactions based on price, time between sales, property type, loan period, and stressed sales.
The IAS360 HPI provides a monthly view of housing price trends in the US based on neighborhood data and tracks the median sale price of detached single family homes in more than 15,000 neighborhoods and 360 counties across the US.
Essentially, the new systems take into account environmental issues such as pollution and noise, neighborhoods, history of the pricing on a particular property, individual characteristics of the property such as structural and even external factors of interest rates, and taxation.
These systems take into account the marginal willingness for a consumer to pay a higher price (in higher housing) for given differences in cleanliness and serenity of the locality.
It will not be long before an analysis of the demographics of the population will be combined with the analysis of the properties. Pairing of possibilities will be available so that we can match the person to a property type and visa versa.
This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review.
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