Mad River Valley Real Estate

MARKET CONDITIONS
The residential real estate market in Vermont (including both improved land and undeveloped land), like much of the nation, experienced a steady rise in the value of real property during the first half of the decade culminating in a sharp increase in both sales activity and property values near the middle of the decade. The period following the middle of the decade experienced varying but generally stable property values, declining sales activity, and lengthening marketing times. There were more definite signs of declining property values along with the other signs of a market in decline at the end of the decade. The economic features of the real estate market varied somewhat in different areas of the State, and between various property value brackets.

The dramatic decline in the market value of real property that took place in many real estate markets across the nation as well as in Vermont was due in large part to the imprudent actions over the decade of many large banks and other financial institutions. The national economy came near to collapse near the end of 2008 and was rescued by large federal bail-outs of the offending financial institutions at the end of 2008 and into the beginning of 2009. It is, in large part, this bank-driven economic collapse that is to blame for the sudden decline in property values at the end of 2008.

Across Vermont and in all value brackets and property types the 2009 residential real estate market experienced an over-supply of property for sale, declining sales activity, rising marketing times, and with only a few exceptions some decline in property values. The value trend analyses reported below shows that the subject market area experienced a declining value trend in 2009 along with declining sales activity.

Sale Activity/Value Trends
The following table shows the results of an analysis of all residential sales ($50,000 and up) that occurred in Warren, Waitsfield and Fayston that were processed by the regional multiple listing service over the past ten years. The number of sales that occurred and the average days on market are shown for the first four months of 2010, but no analysis of the data was done because there is too little data to make the analysis meaningful.

MULTIPLE LISTING SERVICE RESIDENTIAL SALES
WAITSFIELD & WARREN & FAYSTON
as of 4/30/2010

Sales activity increased on a year-to-year basis from 2000 to 2004 for a high point of the decade, and decreased steadily from 2005 through to the end of 2009. Sales activity in 2009 was the low point for the decade. Median sale price increased from 2001 through to 2005 (with the exception of a small dip in 2004), dropped slightly in 2006 and again in 2007, and rose to slightly above the 2005 level in 2008. Median sale price fell dramatically in 2009 to below 2003 levels. Marketing times generally decreased from 2000 to 2005, increased steadily from 2005 through to 2008, and declined in 2009.

This next table shows a comparison of the number of sales of residential property in the subject market area over the decade to the number of listings of residential property at the end of 2009 and as of September 16, 2011. Analysis of the data results in a supply of property that is for sale in years. With the listings data for the end of 2009, the average annual sales for the decade is 60 sales per year which is a 1.3 year supply and the average annual sales for the last two years is 44 sales per year or 1.8 year supply. With the listings data for September, 2011, the average annual sales for the decade plus 2010 is 58 sales per year which is a 2.1 year supply and the average annual sales for the last three years is 42 sales per year or 2.9 year supply.

The analysis of listings as of the end of 2009 is the most relevant to the appraisal based on the effective date of April 1, 2010, but the analysis of listings as of September, 2011 is useful in showing that the supply and demand situation in the residential subject market has not improved, but has actually worsened.

SUMMARY OF SUPPLY/DEMAND- RESIDENTIAL PROPERTY- WAITSFIELD & WARREN & FAYSTON

The following table shows a summary of an analysis of land sales that occurred in the subject market area (Fayston, Waitsfield, and Warren) from 2000 to 2010 with site area from five acres and up. The sales data was retrieved from the Vermont Real Estate Sales website. This is a by-subscription website that permits custom searches of the property transfer returns that are collected by the State of Vermont tax department. This data falls into the category of secondary data, as discussed above. Those sales with buyers and sellers with the same last name have been excluded, and several of the lowest and highest value sales have been excluded as being inapplicable to the analysis.

LAND SALES- 5 ACRES & UP/WARREN/WAITSFIELD & FAYSTON/2000- 12/31/2010

The analysis takes the sum of the total number of dollars spent each year and divides by the total number of acres sold for that same year resulting in an average per acre sale price for each annual period.

Analysis of the land sale data shows value trends that are similar to the residential sales data above with a culmination of an overall rising value trend in 2005 followed by fluctuating but overall declining value trends through to the end of the decade. The main difference from the residential sale analysis is that after 2005 the land values expressed as annual average per acre sale price declined sharply and except for a small gain in 2007 continued a downward trend through to the end of 2010.

The 2010 land sale data, which is less relevant to the appraisal because the effective date of the appraisal is April 1, 2010, is helpful in that it shows that the value and sales activity trends that were established in 2008 and 2009 are not a short term phenomenon, but have continued to be a reality in the land market in the subject market area. This makes good sense when one reviews the large over-supply of existing residentially improved property that is for sale as shown above.