Regression for GLA Adjustment

[Mike Ault]

I think somewhere in there is the notion that one in the hand is worth two in the bush. I am continually surprised at how many people view the purchase of a dwelling "now" as an existential necessity. The gap you are questioning, particularly of late, seems to me a product of an unwillingness to wait, regardless of cost.

I agree, and I do not consider those buyers "typically motivated", but rather operating under "undue stimulus".

 

[djd09]

do you subtract the land value before or after you regress

 

[Mike Ault]

do you subtract the land value before or after you regress

Back to the Batcave with you, "mouthfetish09".

 

[TerryRohrer]

I agree, and I do not consider those buyers "typically motivated", but rather operating under "undue stimulus".

It is a balancing act. When most of the sales include the same undue stimulus, the probability increases that that is the typical motivation. It is a crap shoot now, with limited supply and enough fools with access to cash and credit to clear the supply. I think there is a collapse coming when we run out of a sufficient supply of those fools!

 

[djd09]

Back to the Batcave with you, "mouthfetish09".

the mouth was made for talking and eating...the tongue was made for deceiving

 

[Mike Ault]

It is a balancing act. When most of the sales include the same undue stimulus, the probability increases that that is the typical motivation. It is a crap shoot now, with limited supply and enough fools with access to cash and credit to clear the supply. I think there is a collapse coming when we run out of a sufficient supply of those fools!

I don't see many underwriters signing off on such loans if appraisers are doing legitimate cost approaches. Someone is fudging somewhere.

 

[George Hatch]

I agree, and I do not consider those buyers "typically motivated", but rather operating under "undue stimulus".

Do you believe that the benchmark for "typical" is internal or external to the market segment in which the subject is directly competing?

Do you think what's typical for timeshares is the same as what's typical for airports or refineries? Do you think what's typical for a $25M estate is the same as what's typical for a 100yr old beater in Detroit? Do you think what's typical in 2023 is the same as what was typical for that same property in 2019?

JGrant, since you're doing the "me-too" to Mike's post you should feel free to respond to that question, too.

 

[Mike Ault]

Do you believe that the benchmark for "typical" is internal or external to the market segment in which the subject is directly competing?

Do you think what's typical for timeshares is the same as what's typical for airports or refineries? Do you think what's typical for a $25M estate is the same as what's typical for a 100yr old beater in Detroit? Do you think what's typical in 2023 is the same as what was typical for that same property in 2019?

I don't think that the typical, well-informed buyer would agree to pay substantially more than the cost to construct a suitable substitute, regardless of the market segment they are competing in. And if they are, it is a sure sign that the market is overheated, and acting under undue stimulus. In that scenario, "the most probable price that a property should bring", is best expressed as a price unaffected by undue stimulus.

 

[glenn walker]

I don't think that the typical, well-informed buyer would agree to pay substantially more than the cost to construct a suitable substitute, regardless of the market segment they are competing in. And if they are, it is a sure sign that the market is overheated, and acting under undue stimulus. In that scenario, "the most probable price that a property should bring", is best expressed as a price unaffected by undue stimulus.

I areas like mine often 65% to 70% is in the Lot and so almost everything sells for more than a cost approach. We have seen many cycles where used old homes sell for as much as a new one. Now where there is available land not so much.

 

[George Hatch]

I don't think that the typical, well-informed buyer would agree to pay substantially more than the cost to construct a suitable substitute, regardless of the market segment they are competing in. And if they are, it is a sure sign that the market is overheated, and acting under undue stimulus. In that scenario, "the most probable price that a property should bring", is best expressed as a price unaffected by undue stimulus.

That's not responsive to the questions I'm asking. Just sayin'.

But since you bring up the CA, do you think the typical buyer for SFRs is considering the CA or IA in their decision making? Or that if they aren't considering the CA or IA then that disqualifies them from being considered either typical or well informed as the typical buyers are being referenced in the definition of MV?

C'mon now. You know the answer to that one. We all do.

Just consider how well the CA related to prices back during each of the RE busts we have worked through in the past. Almost nothing gets built during an RE bust because it's not financially feasible in those market conditions. Due to the supply/demand dynamic.