Like most appraisers I try to keep up with the latest market statistics and I read the "business" press, the university forecasts and real estate brokerage reports. It's interesting to read reports over and over again about how the Las Vegas economy is "improving," about how it's just a matter of time until the recovery really kicks in. It's the ridiculous "if we build it they will come" theory twisted by the press into "if we write it (or promote it) that will make it so."
I have no doubt that the economy will, if given enough time, improve. How much of an improvement will actually occur? The National Association of Realtors has projected commercial vacancy rate decreases in 2013 of about 0.03% for office, industrial and retail markets in the U.S., that's not a decrease that indicates a boom. While rent growth and construction volumes were forecasted by NAR to increase, does anyone who has seen the massive decreases since 2007 believe that a 1% increase is a "significant" gain.
For appraisers and their appraisal reports today the positive outlooks, forecasts and projections espoused by some authors regarding a "coming recovery" are meaningless, opinions do nothing to change the reality of the current market. Yes anticipation is important but people have to be able to act on their anticipation to change demand.
I have to say that the more authors tell me how improved the economy and prices will be the more skeptical that I become. I have lost my early awe of the press and of academic authors, more often than not their work products are biased by their politics. If I wrote an article that said that I think values will double over the next year, without any basis in fact, someone in the local business press would want to prominently publish it. As if my saying it in writing made it so.
Is it really now going to become an appraiser's responsibility, possibly working from his or her home / office, to predict the next important real estate market movement? I have already seen inconsistencies, some appraisers saying that a certain market segment is flat while others are saying that it is "improving." It's easy to just quote brokerage firms and economists, but aren't they the same people who haven't seen the past crashes coming? Aren't they also some of the same people are blasting appraisers for being too conservative because they don't increase values based on the highest possible sale?
Appraisal methodology has been successful over the last century allowing appraisers to look backward in time to establish a current value opinion. Considering the direction of the real estate market has always been a part of that process. So the requirement for an investigation of market trends is not new.
Since we as appraisers often have to defend our opinions most of us are conservative and we remain skeptics about changing markets, we don't wear rose colored glasses, but we are always interested in all of the unbiased, uninterpreted market information that we can get. As we all know one or two transactions at a higher unit price in a good sized market are not a reasonable basis for stating that there is a definitive trend, no matter how badly a seller, agent or builder wants them to be.
For more appraisal information contact Glenn Rigdon
MA, MRICS, ASA is a Las Vegas / Henderson Nevada appraiser who can be contacted via email or via his business website Appraiser Las Vegas
), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/
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