Steven R. Smith

Housing Market Tracker - A Brief Look at Global House Prices

Predatory Lending was not restricted to the USA. Nor was the Mortgage Fraud or Appraisal Fraud that went along with it. Prices will fall back until they reach a level where there is supportable demand, which is in the Household Incomes of the local markets.

We can predict and are teaching Appraisers in my market area how to predict the bottom of local housing markets and the timing. We do this by measuring the rate of change over the last 12 months, and chacking for velocity.

We check the last 3 months and compare to the average for the 12. If it is constant {which it is not}, it is one thing. If it is increasing {which it is}, then it is a different thing.

Example, last week we taught a group of 12 to project the future in a market that had gone down 16% in a year, but 10% of that was in the last Three months. Using 3.3% per month we projected the Trend Line outward in Time.

Using Household Income, 32% underwriting ratio and a Fixed Rate Loan Constant of .0063, we calculated the supportable Loan Amount and added a 20% down payment.

Next we subtracted this calculated amount from the Average House Price for our area we were studying and came up with a 36% Differential.

This is the amount left to be shed before we could expect the market to Stabilize and stop going down.

In this example, the market will stabilize in 8+Months. Try it in any area where you can get HHI and Sales Price Averages. It works.

Actually, Prices might stabilize a little higher, but so what, we are not brain surgeons trying to be 100% precise, but we can be predictive with a certain level of certainty.

The breed of appraisers who are learning this type of thing are forming an new order, called Property Economists. Small in number, but led by the teachings of George Dell, MAI, SRA of San Diego and myself.

The next course to be offered will be a four day session on Stats and Graphs for Appraisal Applications in Roseville, CA on 4/8/08