Overall Market Trend (Min 12 months)

[J Grant]

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.

Can you show me that specific guideline?

I do not recall it as an instruction, and it seems counterintuitive to the scatter chart they showed, which is reacting to monthly changes. The scatter chart looks like a heat map from True Function, which IMO may not be credible as a trend because it can be skewed by sales in any given month but it certainly does not indicate a one-time trend applied a year when a clear change of market conditions is seen, especially one that lasts several months or longer.

If the market stopped rising 6 months ago , where is the support to add an upward time adjustment to a sale that was negotiated 5 months ago and closed 4 months ago? A review of current listings and pending sales is a reality check- IMO, no chart or graph should be relied on as a stand-alone basis, they should be correlated to pending listings and the latest sales of relevant comps.,

 

[alebrewer]

Can you show me that specific guideline?

I do not recall it as an instruction, and it seems counterintuitive to the scatter chart they showed, which is reacting to monthly changes. The scatter chart looks like a heat map from True Function, which IMO may not be credible as a trend because it can be skewed by sales in any given month but it certainly does not indicate a one-time trend applied a year when a clear change of market conditions is seen, especially one that lasts several months or longer.

If the market stopped rising 6 months ago , where is the support to add an upward time adjustment to a sale that was negotiated 5 months ago and closed 4 months ago? A review of current listings and pending sales is a reality check- IMO, no chart or graph should be relied on as a stand-alone basis, they should be correlated to pending listings and the latest sales of relevant comps.,

From DW:

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 necessarily mean market condition (time) adjustments must be applied to every comp. Consider a market where over the past 12 months prices increased for the first 6 months and then were stable over the next 6 months. The report would state that prices were increasing, because that is the year-over-year trend. But, for comps that sold during the the most recent six months (the period when prices were stable), no market conditions (time) adjustment would be applied.

 

[J Grant]

From DW:

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 necessarily mean market condition (time) adjustments must be applied to every comp. Consider a market where over the past 12 months prices increased for the first 6 months and then were stable over the next 6 months. The report would state that prices were increasing, because that is the year-over-year trend. But, for comps that sold during the the most recent six months (the period when prices were stable), no market conditions (time) adjustment would be applied.

The response on page one is a generic overall trend, while the trend lines or scatter graphs wrt to support making (or not making ) market conditions/time adjustments are more detailed and as you note apply to individual comps -

That said, IMO, it would be misleading to report the trend on page one as increasing if, 4 months ago, the market froze as stable or started declining . However, it is reported might need an explanation and the larger more genric data trend on page one might not match the smaller market area and particular to subject property type market conditions and trend,,

 

[Terrel L. Shields]

"As of the date of appraisal the market was declining. As of the date of report, 3 days later, the market was increasing.." yeah, totally makes sense...right? Gee, even in valuing a retrospective mineral interest I only have to use monthly data on the price of oil or natural gas.

 

[J Grant]

"As of the date of appraisal the market was declining. As of the date of report, 3 days later, the market was increasing.." yeah, totally makes sense...right? Gee, even in valuing a retrospective mineral interest I only have to use monthly data on the price of oil or natural gas.

I agree that over-sensitivity creates its own misleading problems - RE is not the stock market where trades are sensitive to swings and change hourly or even by the minute.

Imo, a reliable trend is at least a quarter (3 months of activity), though of course, an appraisal should comment on a critical relevant to the area recent event or change:

"The subject market area was increasing monthly; however, two days before the effective inspection date, large swaths of property around the subject were burned out, and many area businesses were closed." Yeah, it might be relevant to mention that.

 

[alebrewer]

The response on page one is a generic overall trend, while the trend lines or scatter graphs wrt to support making (or not making ) market conditions/time adjustments are more detailed and as you note apply to individual comps -

That said, IMO, it would be misleading to report the trend on page one as increasing if, 4 months ago, the market froze as stable or started declining . However, it is reported might need an explanation and the larger more genric data trend on page one might not match the smaller market area and particular to subject property type market conditions and trend,,

you gotta do you, J. I'm just relaying what has been proffered by folks in the know.

 

[Joe Flacco]

They are officially defining "overall trend" as the year over year trend. Makes perfect sense and it is the best way to do it.

The "overall trend" also applies when discussing the trends for closed sales, active listings, absorption rate, DOM, months of supply or anything else we are analyzing over time.

Now everybody is on the same page about what is the overall trend.

 

[J Grant]

They are officially defining "overall trend" as the year over year trend. Makes perfect sense and it is the best way to do it.

The said they want the trend for the last 12 months. A year-over-year trend should be added to that.

 

[shrubberyvaluation]

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.

if Jan-Feb is 1% increase and Feb-December is stable you check increasing. No doubt in lawsuits this will be fought over for being misleading.

 

[Joe Flacco]

They should have specifically said year over year but whatever. 13 months is YOY if looking at the data on a monthly basis. If looking at it quarterly then it would be 15 months.

But anyway, overall trend is not 3 month trend, 4 month trend or 9 month trend, or the trend from your oldest comp. It is the trend from a year ago. And if a comp needs an adjustment and what the adjustment is are separate questions from what is the overall trend.

Exactly the way it should be.