Overall Market Trend (Min 12 months)

[Terrel L. Shields]

Time adjustments are difficult because of many factors - seasonality, nonlinear trend, lack of data let alone good comps, etc.

The problem is that the data available may have a much higher margin of error from the norm than the apparent change in market conditions over that one year. And it could take only one or two 2 std dev from the mean to reverse an apparent trend.

 

[Dublin ohio]

What purpose of Fannie to force appraisers to do market/time adjustments. Time adjustments are difficult because of many factors - seasonality, nonlinear trend, lack of data let alone good comps, etc.
Appraisers are set to higher bar & knowledge and to do more work to decide if market conditions are warranted.
If data and market unclear, it's best not to do time adjustments or at least make conservative adjustments.
Sounds like lenders have influenced Fannie to force appraisers to be appraise higher using time adjustments.

No one is forcing appraisers to do anything but provide support for or for the lack of adjustment(s)

 

[Fernando]

No one is forcing appraisers to do anything but provide support for or for the lack of adjustment(s)

Many appraisers don't know how to interpret stats especially all the nuances and outliers.
I can tell you different appraisers will have different conclusions.
Back in 2022, I appraised this neighborhood and felt market was stable.
This year back at that neighborhood, I see market has decreased since then. The assessor lowered the values for homes bought in summer of 2022 and less so end of year.
The point is appraisers do not have the knowledge and insight that computers/AVMs can determine. Fannie needs to stop making appraisers think like AVMs.
What we can do is getting best appraisal value from our reconciliation in analyzing best data we have.

 

[shrubberyvaluation]

Just addressed in another thread:

Post in thread 'Why can't we band together on Feb 4th?'

Yesterday at 8:43 AM

It was good that Fannie has clarified what it wanted - a 12 month analysis. It's a start in setting a standard for appraisers.

Just to be clear, the 12 month analysis should be the basis for the response on page 1 of the URAR indicating the price trend (stable, increasing or declining). So, if prices have risen over the past 12 months, then the trend would be indicated as "increasing."

As you noted, this clarification was made because research with appraisers found that no consistent methodology was being applied.

Also, just because the trend is increasing, that does not...

• DWiley

• 

So its possible prices have increased in the past 12 months but say yoru comps are within 6 months and the market stabilized. This would mean you do increasing because its based on 12 months even if no adjustments are warranted.

 

[Jayjay25]

What purpose of Fannie to force appraisers to do market/time adjustments. Time adjustments are difficult because of many factors - seasonality, nonlinear trend, lack of data let alone good comps, etc.
Appraisers are set to higher bar & knowledge and to do more work to decide if market conditions are warranted.
If data and market unclear, it's best not to do time adjustments or at least make conservative adjustments.
Sounds like lenders have influenced Fannie to force appraisers to be appraise higher using time adjustments.

I think the purpose of having appraisers try and adjust comps up and down, month to month based on market fluctuations (similar to stock prices) is to try and make our appraisals look and function more like the collateral underwriting system and Zillow’s valuation algorithm. I think the CU system also had trouble keeping within the 15%net/25% gross guidelines which is probably why those were done away with too.

The more our appraisals and techniques look like those derived by collateral underwriter the more they can discount what it is that we do.

 

[J Grant]

So its possible prices have increased in the past 12 months but say yoru comps are within 6 months and the market stabilized. This would mean you do increasing because its based on 12 months even if no adjustments are warranted.

Imo that is incorrect. When did teh market stabilaie ? If your comps contract price were within the past 6 months AND the market stabilized 6 months ago, then there would be no market conditions made on the comps that went to contract and closed within the past six months.

The comment could be, "Up until six months ago, the sales prices were increasing from August until Feb.. After Feb, the market stabilized, and the comps went to contract and closed in the last six months. Therefore, no market conditions are made to the comps.

If however, for example, a comp went to contract 10 months ago, prices rose for 4 months afterward and then stabilized, so I would adjust 4 months upward for that comp.

The market conditions and analyzed and reported during the past 12 months, but we might not have a straight line trend that applies for the entire 12 months.r.

 

[alebrewer]

I posted this one in another thread. Rural property I am seeing tomorrow. It is a macro since I only had 4 similar sales in the past year. Did it quarterly since I only had 72 sales in the past 12 months and 61 sales in the previous 12 months in a 100+ sq mile neighborhood. All of the low points were periods of very low sales volume. Figure this one out. 1 of my sales is in March, 2 in June and 1 in late November

View attachment 96078

Since there are so few, did you try adjusting for elements of comparison before modeling price and date?

 

[Tom D]

It's now called a non linear time adjustment. Or you can do a linear. Spark is now showcasing it's version. Really interesting about the options explained for what you want to look at for a time adjustment.. It is now rocket science. Gonna take a little bit of time to master it, but no more pay for the extra master work. I suppose once you set up your choices it a template. But i can only say that for my urban row homes. Not sure that rural won't have to do a depth look each time at the options. A lot of people seem to think you need a non linear time adjustmet for the new guideline.

The Spark update is here!
Starting today, Spark has a new market analysis and time adjustment feature based on the Fannie Mae and Freddie Mac guidelines.
Watch the latest on YouTube. It's a hell of an explanation of what you can look at and why. You pick what you like best and it gives you a page explaining the reasons for your report.
Watching the video on YouTube, It is rocket science.

Spark Spotlight: Updated Market Conditions (aka Time) Adjustments​

 

[alebrewer]

When did teh market stabilaie ?

Per DW's (and the regs) guidelines, if the overall trend over the 12 month period (i.e. straight line over 12 months indicates an upward trajectory, then the box on P1 should be 'increasing' - even if it stabilized 9 months ago.

 

[Terrel L. Shields]

for or for the lack of adjustment(s)

Yes, we have no bananas today. " ...after extensive paired sales, multi-linear regression runs and sensitivity analysis, I found no evidence to support an adjustment for the difference in Hardi board and painted wood siding."