Overview of Current Market Conditions

As we all know, we have seen a reduction in the market value of real estate during the last three years. These changes in market value will vary depending on the community, the location within the community and the price-range of individual properties. To measure the extent of the reduction we use the median selling price of real estate within distinct categories, to illustrate those changes. (The median selling price is the middle price of all valid transactions arranged from the highest to the lowest. We use the median and not the average because the median gives equal weight to all sales. The average gives added weight to very high or very low sales.)

Shown in the following graphs are the changes in median price in Barrington, for single-family homes (the major category within the town). The graph begins with the data from the last revaluation conducted in 2005 and goes on to show the changes that have taken place in the last three years since the 2005 revaluation.

From the above data we would think that prices continued to rise in 2008 given the change in median price from $425,000 in 2007 to $449,000 but a further analysis of the changes in the level of assessment over the same four years gives us a different perspective. (The level of assessment is a ratio of selling price to the assessment established in 2005. A ratio below 100% indicates that the selling price was higher than the assessment and conversely, a ratio greater than 100% indicates that selling prices are less than the assessed value.

From the graph shown above we can see that the level of assessment declined through 2007 and then increased in 2008. This indicates that the selling prices fell compared to assessments for the first time in 2008. The reason that the analysis of median selling price showed an increase in 2008 is due to a change in the types of properties being sold in 2008. The median price of $449,000 indicates that higher value properties were selling in greater proportion to lower priced homes creating a higher median selling price not reflective of an overall increase in market value.

In the last graph we show the level of assessment for the 2008 sales broken down by price range. This graph shows how different aspects of the Barrington real estate market reacted during 2008. As we can see above, the lower end of the real estate market is showing the greatest loss of value during 2008, the mid-range has a somewhat lower loss of value and the high-end market has seen an increase in 2008. It should be noted that the increases and decreases we are speaking of are selling prices measured against the assessments established in 2005. The above data indicates that high-end properties will see an increase over their 2005 assessments (not necessarily that market values have increased in 2008). Lastly, the above trends are general representations of the market. Individual assessments can go up or down based on other factors such as building permits, renovations, demolitions etc.