Appraisers' Free Forum

Dale Hill

First of all, no claim of Standard 3 from me as this is in the Appraisal Review section of this forum, just thought you might find it as amusing as I did.

A certified appraiser was asked to reconcile the subjects rather significant increase in value from a previous sale just over 2 years ago, in what the report described as a currently stable market.

The response was that the increase was due the market inceasing 5% to 7% per year for the past 5 years and that it continues today. He went on to explain that as the rate of increase was steady at 5% to 7% for this time period, property values are stable.

I responded that stable is defined as no change, and would he make the same argument for values being stable if property values had been decreasing at 5% per year, for 5 years and continuing today, would he still consider the market stable.

No reply yet

lies, damn lies, and statistics

**Bad Hombress** · Posted: Fri Aug 17, 2007 11:32 am Post subject:

Good point.

I want to be a reviewer when I grow up.
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What? Me Worry?

**Annemieke Roell** · Posted: Fri Aug 17, 2007 11:45 am Post subject:

I want to specialize in reviews as soon as I am certified. (Sorry TC .... hope you will still love me).
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We're not being stopped by something on the outside, but by something on the inside.

**Steve Owen** · Posted: Fri Aug 17, 2007 3:55 pm Post subject:

I once argued in a class that if overall inflation was increasing by the same amount as the real estate values, then the market was stable. My point... that you should not look at markets in a vaccuum. Therefore, it would theoretically be possible for a market to be increasing in nominal value, but still decreasing in actual value.

That didn't carry much weight with the instructor. She pointedly told me that Fannie wants the box marked "increasing" if the number is larger than it was last year. Flush

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I haven't a particle of confidence in a man who has no redeeming petty vices.
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**Edd Gillespie** · Certified General Joined: 13 Aug 2007 Posts: 2282

**Edd Gillespie** · Certified General Joined: 13 Aug 2007 Posts: 2282

**Steve Owen** · Posted: Sat Aug 18, 2007 1:28 pm Post subject:

**Edd Gillespie** · Certified General Joined: 13 Aug 2007 Posts: 2282

**Jim Plante** · Posted: Sat Aug 18, 2007 2:17 pm Post subject:

**Steve Owen** · Posted: Sat Aug 18, 2007 2:52 pm Post subject:

Yes. Or, perhaps, if she was correct, it is Fannie and Freddie who do not understand the difference between price and value. For what it is worth, the lines on both the old form (in use at the time of the discussion) and the new forms say "property values." However, this instructor, I believe one of the better ones, said that Fannie and Freddie want to know whether house "prices" are increasing, stable, or decreasing... basically that the larger economic issues of "value" based on comparison of house prices and general economic trends is an analysis for longer term trends than the single year (or shorter) that appraisers usually consider.

I suspect that she was right. Nice that they make is so confusing, huh?
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I haven't a particle of confidence in a man who has no redeeming petty vices.
- Mark Twain, a Biography

**Jim Plante** · Posted: Sat Aug 18, 2007 3:04 pm Post subject:

Well, Steve, if you consider that an annual inflation rate is applied to the whole dataset of sales over the past year, then it uniformly affects all properties, and the selling price is as good an indicator of trend as the inflation-adjusted price. If I were doing, say, a three or five year analysis trying to spot seasonal trends, applying an inflation adjustment might be kosher.

It just irritates me when instructors are imprecise, or fail to explain the minor details that can have a major effect. Still, it's easier said than done. Good instructing is an art in itself.
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Jim Plante

**Edd Gillespie** · Certified General Joined: 13 Aug 2007 Posts: 2282