The fair market value of home prices is determined by supply and demand. That is fundamental economics. But something unique is happening to Sequim and Port Angeles real estate prices that you may want to know. When supply decreases over a period of time and demand remains steady, prices will be pushed up. That’s logical, but there’s another implication that may surprise buyers.
Fair Market Value – Prices Pushed Upward
When you find the ideal home and want to make an offer on it, you will want to know what the fair market value is. The number one way to do that in any market is to examine comparable sales. Appraisers also look at the cost of replacement, and the county assessor has expensive software that estimates value, too. But once having done all that, and once you’ve come up with a reasonable fair market value based on the past six months of activity in the real estate market, if supply has been shrinking and demand has remained steady, which is the case in Sequim, what was fair market value a couple of months ago may no longer be fair market value today. In this case, the interplay of supply and demand can push fair market value up even though demand has not increased. Here’s a good example.
Fair Market Value Example
A two year old, 3 bedroom, 2 bath home with 1,850 square feet in a nice neighborhood with a fair market value of $300,000 based on comps from the past six months has a higher fair market value today, because there are almost no houses left in the inventory like this one. There’s a point at which prices can be pushed above recent fair market value because the supply has dramatically dropped while buyer demand continues steady.
That is exactly what is happening to one segment of the home inventory in Sequim and Port Angeles. When it comes to negotiating price, fair market value may be moving upward.
Last Updated on September 22, 2019 by Chuck Marunde
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