I wanted to share something for those who may not fully understand the role of a real estate appraiser when determining market value. This is more for homeowners, buyers, sellers, or anyone not familiar with the appraisal process.
One question I get asked fairly often is, "Where do you think the housing market is going? Are prices going to increase or decline?"
The reality is that, for most residential appraisal assignments, our job isn't to predict the future. We analyze market data to develop an opinion of what a property is worth as of a specific effective date.
We typically analyze at least 12 months of market activity, including closed sales, current listings, and other relevant data. Sometimes we look further back when necessary to understand market trends and determine the property's current market value.
For example, we might determine that home prices in a particular market have declined 2.9% over the past year. Or we might find that similar homes in a subdivision have been selling within a certain price range. After considering differences between those properties and the subject, we can develop a supported opinion of market value.
These conclusions are based on actual market data and analysis, not speculation about what might happen next.
There are simply too many factors that can influence where the housing market goes in the future. Interest rates, inflation, employment, fuel prices, government policies, wars, natural disasters, and countless other events can affect buyer behavior and property values. Many of these factors are impossible to predict.
That doesn't mean we can't recognize market trends. We absolutely can. But identifying a trend and predicting what happens next are two different things.
An appraiser's primary job isn't to tell you what your home will be worth six months or a year from now. It's to analyze the available market evidence and develop a supported opinion of market value as of the effective date of the appraisal.
That's an important distinction I think often gets overlooked.