This is a pretty niffty detailed chart for finding time adjustments, we are done.

[Joe Flacco]

It's more clean in a place like LA where there are minimal weather issues. Prices are in a rage for most of the year and then all of a sudden it is in a new range.

 

[DWiley]

Excuse my ignorance but is there a software program available to appraisers that would generate that graph for a easy copy paste solution? Or does FNMA expect the appraiser to analyze the market and manually produce that graph.

There are several. Back when I as still in the field, I had software that would allow me to, in a short time, import data, analyze trends for any market segment I wanted, and produce similar graphs and/or other relevant graphs or charts. Certainly what is available now is even better than what was available 15 years ago.

 

[alebrewer]

What does be more precise mean?

A market shows a trend in prices over a period of 2 months, 6 months a year etc that overall, is stable, increasing or decreasing.

At some points a stable trend stops and then it might increase, so that might be more precise for an older sale that experienced both. Which will make the reviewer's head explode.

It means that even the data on that nifty graph developed by F/F could be fitted into a linear model, but F/F is intimating that is rather lazy. For instance, for the data set below, if calculating the MoverM delta, the 'correct' methodology - based on the F/F guidance - would be to apply market adjustments as follows:
Contract September: +1%
Contract July: +17%
Contract May: +10.6%
and so on.

However,
That data can also be pressed into a linear regression model (notice the trendline in the graph) that would indicate there has been almost zero appreciation or depreciation over the prior 24 months. Flacco very adeptly (and often) notes the seasonality of price trends - based on the F/F guidance, we should be using that seasonality as basis for month over month market trends - as opposed to smoothing the seasonality out of the data and forcing it into a linear model.

Of course that begs the question: do the sales you're using in your analysis 'follow' the MoverM trend? IOW - if the particular sale you're using contracted in May, yet when you apply that 10.6% market adjustment, you skew that adjusted value too high, then it follows that sale didn't follow the 'trend'. Do you then stubbornly make the 10.6% adjustment just because that's the guidance, or do you apply a linear adjustment because it tends to 'smooth' the variability of the monthly trends, or do you make the market adjustment that makes that adjusted sale 'fit' with the remainder of the sales you're analyzing (i.e. do you apply market adjustments that reduce the range of value)?

 

[Mike Ault]

Not hard to do in Excel. I've included these in every report where sufficient data exists to do so since 2009, shortly after the release of the 1004 MC addendum. I feel it's better to analyze the market with some sort of "value indication" instead of simply "price" so I graph price per SF over time. Of course, when the market segment being analyzed contains substantial nonresidential components such as large site sizes, outbuildings, or external site considerations which affect value, this simple "price/sf analysis" doesn't tell the whole tale.

 

[J Grant]

Not hard to do in Excel. I've included these in every report where sufficient data exists to do so since 2009, shortly after the release of the 1004 MC addendum. I feel it's better to analyze the market with some sort of "value indication" instead of simply "price" so I graph price per SF over time.
View attachment 94554

Those are good and these kinds of trend charts are avail from MLS or software etc , but they ar not the individual property house specific comp by address chart like the one was posted on the example from Fannie - I hope that never becomes an expectation.

 

[Mike Ault]

Those are good and these kinds of trend charts are avail from MLS or software etc , but they ar not the individual property house specific comp by address chart like the one was posted on the example from Fannie - I hope that never becomes an expectation.

If it does, there will be plenty of software providers out there rushing to fill that void. The 1004 MC requirement spawned many different software solutions, and the one that you are worried about above should be no different.

 

[alebrewer]

Not hard to do in Excel. I've included these in every report where sufficient data exists to do so since 2009, shortly after the release of the 1004 MC addendum. I feel it's better to analyze the market with some sort of "value indication" instead of simply "price" so I graph price per SF over time. Of course, when the market segment being analyzed contains substantial nonresidential components such as large site sizes, outbuildings, or external site considerations which affect value, this simple "price/sf analysis" doesn't tell the whole tale.
View attachment 94554

This is nice, but not really what they're looking for, as your scatter plot is on a continuum. They're looking for those sales to be grouped together by month and then the trend adjustments applied based on a delta between a particular month and the current baseline.

 

[Mejappz]

Looking at real estate trends using just sale prices over time can really give you the wrong idea about what’s happening in the market. One big problem is that the properties being sold at any given time aren’t all the same. If you don’t consider the differences in property characteristics—like size, condition, age, or even if a home was recently renovated—you’re likely to end up with a very skewed perspective.


Think about it: if a bunch of fully remodeled, luxury homes sell this year, but last year most of the sales were smaller, older homes, it might look like prices are skyrocketing. But in reality, it’s not that every property is suddenly worth more—it's just that more expensive homes are dominating the sales. The opposite is true too. If more fixer-uppers hit the market during a certain period, prices might look like they’re dropping when, really, they’re just reflecting the condition of the homes being sold.


That’s why it’s so important to dig deeper and account for these differences. Using tools like multi-variable regression can help because they look at how things like size, age, and features affect prices, while also accounting for trends over time—even if those trends aren’t perfectly straight lines. It’s a way to separate what’s happening with property values from what’s just noise in the data. Otherwise, you’re really just guessing based on surface-level patterns, and that can lead to some pretty misleading conclusions.

Yeah, much like when they introduced the 1004MC Fannie has no clue what they are doing.

 

[Mejappz]

I'm not sure why everyone is getting worked up over this issue. The bar is now so low that anyone can clear it with room to spare. From the FNMA Selling Guide issued today, the actual requirements are:

"Time adjustments, or the lack thereof, must be supported by evidence. Use of home price indices (HPIs) to support time adjustments is consistent with our policy. The adjustment rates can also be determined through statistical analysis, modeling, paired sales, or other commonly accepted methods. The appraisal report must, at a minimum, summarize the supporting evidence and include a description of the data sources, tool(s), and technique(s) used."

The FHFA HPI calculator appears to cover the entire USA, so just put in State, MSA, quarter of sale, quarter of valuation, sale price, and Enter. An answer will appear on our screen.

House Price Index Datasets | FEDERAL HOUSING FINANCE AGENCY

www.fhfa.gov

Don't read the fine print:
"When using the FHFA House Price Calculator, please note that it does not project the actual value of any particular house. Rather, it projects what a given house purchased at a point in time would be worth today if it appreciated at the average appreciation rate of all homes in the area. The actual value of any house will depend on the local real estate market, house condition and age, home improvements made and needed, and many other factors. Consult a qualified real estate appraiser in your area to obtain a professional estimate of the current value of your home. Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 requires that any appraisal used in connection with a federally related transaction must be performed by a competent individual whose professional conduct is subject to supervision and regulation. Appraisers must be licensed or certified according to state law.

The FHFA House Price Calculator uses the FHFA Purchase-Only House Price Index (not seasonally adjusted) for all states, including the District of Columbia, and for the largest 100 Metropolitan Statistical Areas and Divisions. For all other Metropolitan Statistical Areas and Divisions the FHFA All-Transactions Index is used. For a list of the largest 100 Metropolitan Statistical Areas and Divisions, click here. For a discussion of the differences between the Purchase-Only Index and the All-Transactions Index, click here."

Wow, now you understand what a mess we were in! LOL

 

[alebrewer]

Looking at real estate trends using just sale prices over time can really give you the wrong idea about what’s happening in the market. One big problem is that the properties being sold at any given time aren’t all the same. If you don’t consider the differences in property characteristics—like size, condition, age, or even if a home was recently renovated—you’re likely to end up with a very skewed perspective.

That's the rub - how granular do you get before modeling price trends. Do you just take raw sales prices for a particular geography and model them? Do you just model those sales that would be considered 'comparable' to the subject (as was the guidance for the 1004MC), or do you 'adjust' your dataset to account for differences in elements of comparison prior to modeling price trends? Been playing with a model where I adjust the data set to the subject and THEN apply a trend analysis. Not sure yet if that's just a lot of extra work or not. The model looks like this: