Appraisal Institute Presentation September 19, 2009 Breckenridge, Colorado
<ul><li>  Objectives </li></ul><ul><li>Explanation of Various Residential RE Statistical Models </li></ul><ul><li>Relating...
Statistical Models-CS <ul><li>Case-Shiller – based on paired residential re- sales  in 20 MSA’s - including Denver  </li><...
Statistical Models-O <ul><li>FHFA (OFHEO) </li></ul><ul><li>Released Quarterly </li></ul><ul><li>Data from FNMA and FREDDI...
Statistical Model-Z <ul><li>Uses the proprietary algorithm “Zestimate” for any given county using recorded  data </li></ul...
Statistical Model-M <ul><li>Denver Local MLS Data from Metrolist Inc. </li></ul><ul><li>Reflects true sale price, is not a...
Case-Shiller vs. Denver Actual
Case-Shiller vs. OFHEO
Case-Shiller-OFHEO vs. Actual
Case-Shiller Comparison
Zillow – Denver vs. United States
Denver Average Residential Sold Price
Denver Median Residential Sold Price
Denver Market Activity-MLS
Average Days on Market for Metro Denver Residential
Average Days on Market for Metro Denver Condo
Residential Price Change Analysis
Condo Price Change Analysis
Seasonal Influx Index-Residential
Seasonal Influx Index-Condo
Total Combined Number of Homes for Sale by Year-MLS
Total Combined Number of Homes Sold by Year-MLS
Total Homes sold in Metro Denver as reported by Metrolist <ul><li>2003 – 47,966 </li></ul><ul><li>2004 – 54,012 </li></ul>...
Sold Price-Metro vs. HR
Sold Price-Metro vs. GVR
Sold Price-Metro vs. Wash Park
DOM for Metro vs. HR
DOM for Metro vs GVR
DOM for Metro vs Wash Park
HVCC Impact on the Housing Sales Market <ul><li>No Empirical Data </li></ul><ul><li>NAR has developed Anecdotal Data  </li...
Additional Time <ul><li>76% of REALTORS reported additional time is needed to obtain an appraisal. </li></ul>
Appraiser Fees <ul><li>Reduced fees reported by ½ of Appraiser respondents. </li></ul>
Increased Costs to Consumers <ul><li>Percentage of Cost Increases </li></ul>
Unfamiliar Geographic Area <ul><li>71% of Realtors reported an increase in out of area appraisers accepting assignments </...
Denver Absorption Rate
Absorption Rate Pricing <ul><li>AR is the current inventory divided by </li></ul><ul><li>last months closed sales X 12 div...
AR Example <ul><li>21,000  (current inventory)  </li></ul><ul><li>_____________ </li></ul><ul><li>(sales) 3000  X  12 /  5...
What does it mean? <ul><li>A balanced sub-market is a 6 months supply  </li></ul><ul><li>Less than 6 months, a sense of ur...
Wrapping Up <ul><li>The various market statistical models trend with relative consistency in spite of different approaches...
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Appraisal Institute Presentation

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Explanation of the statistical approach to establishing a value for residential real estate by Larry D. McGee, The Berkshire Group, Denver, Colorado 303-513-1436

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Appraisal Institute Presentation

  1. 1. Appraisal Institute Presentation September 19, 2009 Breckenridge, Colorado
  2. 2. <ul><li> Objectives </li></ul><ul><li>Explanation of Various Residential RE Statistical Models </li></ul><ul><li>Relating sub-markets to the whole </li></ul><ul><li>HVCC information from NAR </li></ul><ul><li>Introduction to absorption rate pricing </li></ul>
  3. 3. Statistical Models-CS <ul><li>Case-Shiller – based on paired residential re- sales in 20 MSA’s - including Denver </li></ul><ul><li>sold to Fiserv (S&P) which uses the data to develop indices to support sales of options + tradable futures on ChiMerEx </li></ul><ul><li>is applicable only to residential resale’s </li></ul><ul><li>data is gathered from recorded information </li></ul><ul><li>calculated monthly using a 3 month rolling average and published with a 2 month lag </li></ul>
  4. 4. Statistical Models-O <ul><li>FHFA (OFHEO) </li></ul><ul><li>Released Quarterly </li></ul><ul><li>Data from FNMA and FREDDIE, includes refinances </li></ul><ul><li>Is a modified version of the WRS approach developed by CS </li></ul><ul><li>Excludes sales made with jumbo, FHA, and VA financing and multi-family sales </li></ul>
  5. 5. Statistical Model-Z <ul><li>Uses the proprietary algorithm “Zestimate” for any given county using recorded data </li></ul><ul><li>Refreshed daily </li></ul><ul><li>Demonstrates the Median Price </li></ul><ul><li>Offers a median MSA value by intuiting a value for each individual property and applying that to all residential properties in a given county </li></ul><ul><li>It is a SWAG developed from a WAG </li></ul>
  6. 6. Statistical Model-M <ul><li>Denver Local MLS Data from Metrolist Inc. </li></ul><ul><li>Reflects true sale price, is not an index </li></ul><ul><li>Is not weighted or seasonally adjusted </li></ul><ul><li>Excludes most new homes sold </li></ul><ul><li>Excludes private sales </li></ul><ul><li>Does not include refinance information </li></ul><ul><li>Suspect because of entry methods </li></ul>
  7. 7. Case-Shiller vs. Denver Actual
  8. 8. Case-Shiller vs. OFHEO
  9. 9. Case-Shiller-OFHEO vs. Actual
  10. 10. Case-Shiller Comparison
  11. 11. Zillow – Denver vs. United States
  12. 12. Denver Average Residential Sold Price
  13. 13. Denver Median Residential Sold Price
  14. 14. Denver Market Activity-MLS
  15. 15. Average Days on Market for Metro Denver Residential
  16. 16. Average Days on Market for Metro Denver Condo
  17. 17. Residential Price Change Analysis
  18. 18. Condo Price Change Analysis
  19. 19. Seasonal Influx Index-Residential
  20. 20. Seasonal Influx Index-Condo
  21. 21. Total Combined Number of Homes for Sale by Year-MLS
  22. 22. Total Combined Number of Homes Sold by Year-MLS
  23. 23. Total Homes sold in Metro Denver as reported by Metrolist <ul><li>2003 – 47,966 </li></ul><ul><li>2004 – 54,012 </li></ul><ul><li>2005 – 53,005 </li></ul><ul><li>2006 – 50,244 </li></ul><ul><li>2007 – 49,789 </li></ul><ul><li>2008 – 47,837 </li></ul><ul><li>y-t-d 2009 – 27,708 </li></ul><ul><li>2009 - 40,200 - Projected year end </li></ul><ul><li>Excludes new homes sold onsite and private sales </li></ul>
  24. 24. Sold Price-Metro vs. HR
  25. 25. Sold Price-Metro vs. GVR
  26. 26. Sold Price-Metro vs. Wash Park
  27. 27. DOM for Metro vs. HR
  28. 28. DOM for Metro vs GVR
  29. 29. DOM for Metro vs Wash Park
  30. 30. HVCC Impact on the Housing Sales Market <ul><li>No Empirical Data </li></ul><ul><li>NAR has developed Anecdotal Data </li></ul><ul><li>Random Sample of 40,000 REALTORS </li></ul><ul><li>3,600 responses generated. </li></ul><ul><li>The HVCC appears to negatively affect the processing time of a real estate closing </li></ul><ul><li>Lost sales were reported by 37% of REALTORS reporting </li></ul>
  31. 31. Additional Time <ul><li>76% of REALTORS reported additional time is needed to obtain an appraisal. </li></ul>
  32. 32. Appraiser Fees <ul><li>Reduced fees reported by ½ of Appraiser respondents. </li></ul>
  33. 33. Increased Costs to Consumers <ul><li>Percentage of Cost Increases </li></ul>
  34. 34. Unfamiliar Geographic Area <ul><li>71% of Realtors reported an increase in out of area appraisers accepting assignments </li></ul>
  35. 35. Denver Absorption Rate
  36. 36. Absorption Rate Pricing <ul><li>AR is the current inventory divided by </li></ul><ul><li>last months closed sales X 12 divided by 52 </li></ul><ul><li> inventory _____________ </li></ul><ul><li> lms x 12 / 52 </li></ul>
  37. 37. AR Example <ul><li>21,000 (current inventory) </li></ul><ul><li>_____________ </li></ul><ul><li>(sales) 3000 X 12 / 52 </li></ul><ul><li>Absorption Rate is 30.33 weeks or </li></ul><ul><li>7.58 months (buyers market) </li></ul>
  38. 38. What does it mean? <ul><li>A balanced sub-market is a 6 months supply </li></ul><ul><li>Less than 6 months, a sense of urgency develops with buyers, prices go up: </li></ul><ul><ul><ul><ul><ul><li>Sellers Market </li></ul></ul></ul></ul></ul><ul><li>More than 6 months, a sense of urgency develops with sellers, prices go down: </li></ul><ul><li>Buyers Market </li></ul>
  39. 39. Wrapping Up <ul><li>The various market statistical models trend with relative consistency in spite of different approaches </li></ul><ul><li>Markets are very local, comparables must be geographically and temporally close </li></ul><ul><li>HVCC is negatively affecting the market </li></ul><ul><li>AP Pricing is leading REALTORS toward a better pricing model </li></ul>

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