Why don't we use the AVM/AMC model to value stocks too?

[Elliott]

About $60 trillion of wealth is in the stock market. About $50 trillion is the value of SFRs in the US. In the last four years, home values have increased substantially even though mortgage rates are high and there is an over supply of listings, mortgage applications are at low levels and home sales are at record low rate (under 4-million per year). Voice of the Appraiser, Crawford, calls the increase in home values "Fannie Juice."

Why not adopt the preferred GSE method of valuation and use a series of companies and black box programs to value the stock market since it doesn't seem to work for SFRs.

 

[jay trotta]

About $60 trillion of wealth is in the stock market. About $50 trillion is the value of SFRs in the US. In the last four years, home values have increased substantially even though mortgage rates are high and there is an over supply of listings, mortgage applications are at low levels and home sales are at record low rate (under 4-million per year). Voice of the Appraiser, Crawford, calls the increase in home values "Fannie Juice."

Why not adopt the preferred GSE method of valuation and use a series of companies and black box programs to value the stock market since it doesn't seem to work for SFRs.

In my area there is a shortage of listings and a lot of Bid Wars, interest rates come down, prices will go up again.

 

[George Hatch]

The difference between the RE markets and other asset types (like stocks or commodities) is the level of transparency in the market itself.

It's impossible to know most of what you need to know about a stock in order to make a "safe/sound" decision - you basically have to trust what they're reporting of their operations. That isn't the case with SFRs. Buyers and sellers CAN develop a well-informed opinion of the asset almost independent of what the seller asserts.

 

[J Grant]

Nothing about this thread makes sense. Crawford made a silly comment. Even if Fannie overvalues sometimes in an AVM , buyers in the end decide what they pay. Stocks trade on volatility and hourly changes they are nothing like RE, which is not liquid and fixed location

I will however add that imo, Fanie and Freddies lax policies wrt valuations, such as no true appraiser independence, the WAIVERS, and in UW allowing so many investors to buy Res RE with low down payment, , abolishing the FHA panel went it went to "lender select" - all of it has skewed the res market to where over 2/3 of it ( I read ) is now investor owned vs owner occupant opwned. This further reduces supply and has made housing unaffordable for many.

 

[Joe Flacco]

The buyers and sellers value stocks. Apple for example trades 50 million shares per day. That is the same thing as having 50 million exactly identical comps every day.

you know exactly what a stock is worth at any moment based on the bid and ask.

 

[CGinMN]

Stocks can serve as collateral, just like real property. No need for AVMs, they just use the trading price. Just like real estate, LTV constraints can applied based on the level of risk, which include volatility.

 

[Elliott]

 

[J Grant]

Stocks are usually paid for with cash at purchase, not financed, correct? Not relying on a 30 year loan, not fixed location, not providing shelter, never needing repair and so on.

The two things have almost nothing in common.

 

[J Grant]

The entire RE market can be overvalued, just as stocks can be, but the reasons for this and the consequences are very different.

 

[cashcatz]

Voice of the Appraiser, Crawford, calls the increase in home values "Fannie Juice."

I like that, and prices sure are juiced after Covid Money Printer Go Brrr