An Appraiser's View

Lamar Jackson's inability to get a contract negotiated is the 2nd biggest story of this NFL offseason, and the rhetoric has me wondering if anyone really understands how this (and home sales/appraisals) actually work? Let me try and summarize it. 
The work that goes into determining the right deal for an NFL contract is enormous. Each potential signee is individually assessed by 32 different teams for their weaknesses and strengths on the field, in the locker room, off the field, in the off season, potential income they will generate, injury risks, estimated number of years left contributing at current rate, and an estimate of contribution at a either an increased or declining rate as the contract ages, depending on the players projection. The team then looks at the entirety of the market, comparable available players, what they are asking for, comparable unavailable players that have recently signed a deal, what were the terms of that deal, and what the team has available to spend. Because each team performs their own analysis each will have their own opinion of a players value. The work and analysis that needs to be done is similar to an appraisal of your home for a mortgage, but differs in that it only takes into consideration what the value is for a specific buyer, which is why some teams are willing to pay more than others. 
Lets look at the contract negotiations from the players side. Most players are represented by a sports agent that either has a long history of successful contract negotiations or works with an agency that does. These agents and agencies do their own research on exactly the same thing the teams do, discuss their results including how they players value may be higher for which teams and why, and come to an agreement on how much they are going to ask for prior to taking calls and offers. Once they have agreed on what they feel is their market price, the agent brings the player to the market. The analysis and agent/player agreement is similar to what an appraiser and real estate agent would do if the property had unique features that would be best marketed to a specific clientele.
  But if all sides have done their homework, why doesn't Lamar have a contract yet? From an outside point of view, it appears to be because Lamar is his own agent, and the valuation of himself done by himself, is at above current market due to his own bias (sound familiar agents?). Although it is possible race may play into some owners or general managers decisions, it certainly does not apply to all of them. The owners are in the NFL business for 3 reasons. Money, glory, and  power. If a player can bring them either of the 1st two on the list, they will be signed. Period. But despite being available for an amount less than what Lamar is asking the Ravens to pay him, not one team has made an offer. That is the fact of the market for Lamar today, and the market is what determines his NFL value. 
 

Real estate values go up, real estate values go down. The old model of a typical year to year market went up a few months, stabilized or dropped slightly for a month or two (a lull), then continued on it's rise. The new normal, what we have been riding for the past 17 years, is a market that has gone up up up and away, fell crashing to earth "unexpectedly", then has once again gone up up up and away, with a few lulls along the way. Will it fall again? Well, the closest item I have to a crystal ball is my elder son's old Magic 8 Ball, which in the past has been right about the market about half the time (which puts it on par with most economists). However, I have studied market history, and one constant is it will eventually repeat itself. The answer to when lies in the data.

As a professional real estate appraiser there are two items I address on every appraisal, has the market been declining, stable, or increasing, and how long would the marketing time be if a property were listed for sale today? These items are important when we look back at data to help predict future values. Although I do not opine as to the future of the market on a typical appraisal, on occasion I have provided a prospective (future) value to a client. How I do this, magic 8 ball aside, is by relying on historical data for individual market areas and property types. The longer I have been appraising, the easier this has become because I can not only use the historical market data available through my subscribed data sources, I can also utilize my own historical data for specific areas.

Which brings me to the questions posed in the headline, "is the housing market declining?" Let's see what the data says. But first a little history on market data in my service area.  

Nearing the end of the last big real estate boom, in August of 2005, I noted on several appraisal reports that values were stabilizing after a four year period of significant value increases, in September of 2005 the market surged and I noted on most appraisal reports that values year to year had increased, and also had increased over the past 30 days. Then in mid October 2005 I reported declining values on a property located in a market area that had been experiencing explosive value increases for several years. This was followed by my reporting declining values in several other market area's in late October, and all areas by the end of November 2005. Meanwhile, the media, economists, local MLS, and state wide data sources did not report or recognize declining values until 2006 and in fact most still indicated values were increasing. (With a few exceptions)

Today the media and economists are talking about when a slowdown might come, and a few are suggesting declining values are on the horizon, but they may once again all be reporting the actual facts for your area a few months too late to help buyers avoid over paying for a property and sellers waiting too long to sell. This week's appraisal data looks eerily like August of 2005. For example, I appraised a property, coincidentally in the same area as I discussed above, and I discovered/reported stable values, and noted marketing times had doubled over the past three months. Deja vu anyone?

The facts are marketing times are increasing, sellers are lowering prices, and it seems buyers are starting to notice. Is this a sign that history is about to repeat itself or is it a just another lull in the market? My son's Magic 8 Ball says "Reply Hazy, ask again later"