Veros goes on to state that they expect the markets to decline in the short term, but bounce back toward the end of the year in areas with strong fundamentals. For these reasons, they’re now adjusting their initial projections from Q4 downward. Periodically adjusting forecasts based on new information is common practice. There are a lot of economists out there offering market predictions right now that are very similar to Veros.

I suspect Mr. Miller’s primary intention here was to publicly criticize Veros because he incorrectly assumed they were an AMC.

How could rents even be projected regarding vacancy and credit losses. No wonder lenders don’t want them on the books.

It is my judgement that this type of thinking is overflowing into the speculative single family market in certain areas.

It is scary that I remember vividly the RTC.

Mike:

Historical does not mean retrospective.

About mid-2000 and dot com bubble collapse, many appraisers & economists were expecting property values to decline, following 4+ years of appreciation.

Veros developed a predictive model which provided 3-month, 6-month & 12-month forecast. Ironically, this model predicted price appreciation, based on a myriad of econometric data such as anticipated employment, household income, unemployment, affordability, interest rates, and much more.

Seemed too optimistic to me.

However, 3-months, 6-months & 12-months later, they hit the nail right on the head.

Appraisers typically won’t attempt to predict future housing prices. Not trained. Afraid of USPAP.

One exception is Employee Relocation Appraisers. We’ve been doing market forecasting & forecasting adjustments since the 1980’s. This became especially critical during periods of undersupplied & oversupplied markets. The most difficult is identifying inflection points & impending market changes.

With regards to big data forecasting, Veros sponsored a number of 2-day Predictive Methods Conferences in early to mid 2000’s. These were attended by hundreds of Bank CEO’s, GSE’s, Wall Street Firms, Credit Rating Agencies. There were virtually no appraisers in attendance except some Chief Appraisers, George Dell, Bob King (Pacific NW Independant). First American was there too.

Fast forward, some of the others now do forecasting too.

This was the long version of historical forecasting for perspective.

With regards to big data in R.E. the big gorilla is Corelogic. I sounded the alarm when they bought the Canadian Matrix software company [don’t recall that company name] and took over CRMLS platform. Nobody cared then and now it’s too late. Appraisers were all too busy filling in forms & MLS had no objections, not knowing then what Corelogic’s strategy really was.

Now they own appraisal software, cost data, and on and on. Some might say this is monopolistic, but the Justice Department won’t pursue any monopolies through antitrust enforcement. This would mean doing their job & actually working.

It certainly has that potential. That is what the PPP and CARES acts were supposed to forestall. Nowhere near enough money was allocated. Similarly in real small businesses (as opposed to so-called small 500 employee corporations) even the ability to apply for loans under these programs has been blocked at the local banking level.

Plausible deniability? I certainly hope not. The 1 to 25 employees small businesses need the money more than Wall Street does. CMBS investors can protect existing principle by sacrificing interest. Commercial tenants can use the current grace period to survive as well as future BK CHpt 11 or 7 protections if the crisis is prolonged.

Truly small businesses won’t have that option. They will simply cease to exist.

A cessation of CMBS won’t be as damaging as a cessation in residential 1-4 unit mortgages would be. Thats where confidence by consumers lives.

Knowledgeable yes. A slave to them? Not a chance.

https://en.wikipedia.org/wiki/Force_majeure

Force Majeure. An act of God, or an act of government? Perhaps it will come down to contract law. Can liability for unnecessary state measures be passed on to negligent politicians?

https://omny.fm/shows/patriot-radio-news-hour/04-13-20-patriot-radio-news-hour

Dewey won, Harry lost: or was it the other way? Where’s that 8 Ball predictor the left corner of the desk or the right.

Minor and major businesses have continual grown. Honest statistics have caused success in cards, dice, and business. When we appraise we predict a future, represented by the present, many buyers accept paying tomorrows value as acceptable, most sellers push for tomorrow’s value whether tomorrow comes or not. When the seller is in charge, the results will be different. The Appraiser should be knowledgeable of the theory of large numbers and more.

“Higher Than We Ever Saw in the 2008 Crisis”: Why the Coming COVID-19 Mortgage Crisis May Be Worse Than the Last One

https://www.vanityfair.com/news/2020/04/why-the-coming-mortgage-crisis-may-be-worse-than-the-last-one

According to a senior Wall Street banker, there hasn’t been one new commercial mortgage-backed security issue in the last month. “You can’t underwrite a property,” he says. “How can you underwrite it when you don’t know which tenants are going to pay rent.”

With companies like Equinox, Staples, and the Cheesecake Factory, along with millions of tenants, not paying their rent, the ripples are already being felt on Wall Street. And the storm may be immense.

It all depends on what the specific definition of ‘accurate’ is. It’s quite common, when dealing with homes with either unexpected depreciation of condition, or additional quality improvements, to be outside of this already broad avm ‘accuracy’ range. An avm determination is merely an automatically formed prediction of categorical placement based on previous sales conditions of both the subject and categorically similar market examples elsewhere. Changes to any analytical condition has a cumulative effect which can skew results. This one, attached, claimed to be somewhere around 3/4’s or 77% confidence in result accuracy. If I could enjoy a 23% results accuracy leeway, dang, I could really pick up the pace! It’s a case of imbalanced standards when it comes to accountability and reliability.

Great insights Mr Ford. The over spot price on silver and gold climbed exponentially. You can’t even get a 1 oz silver round produced by the US mint at anything under $8 over spot, and even then, availability limited. That was surfing just under $2 over spot this time last year. That is rational given the sudden increase in the fed’s balance sheet which will predicatively, follow by a decline in value of the dollar. When the whole world rushes tangible fungible assets.

One interesting point to make in this regard is that despite the best efforts of central planners, peoples habits and desires are not so easily manipulated. Those lost jobs are not gone due to organic events. Nor lost from necessity to shift consumer trends due to new inventions or obsolescence of the industries as time passes. People will still demand luxury, entertainment, restaurants, the expected adequacies they are accustomed to, church and religion. The ability to buy and sell in free markets, to have liberty and support whom they please. We’ll see much more of this armchair forecasting as the consequences to central planning progresses. We’ll also see a rebound of many industries which will be quite unpredictable, as resources permit their reproliferation. Predictive systems only function adequately under predictable circumstances. So much for predictive mechanisms in the age of big tech and central government planning. It had always been a self defeating effort and we never stopped believing that. It’s going to take a long time for price and value to come back to equilibrium.

CG respectfully, describing historic scientific modeling as ‘pretty accurate’ is like an appraiser telling their state board “I’m pretty sure my adjustments are accurate.” In both cases, quantified evidence is required. Especially in the growing black or white; fail or pass interpretations of USPAP by several influential state regulatory agencies.

“Pretty good” is just not good enough. Unless Veros is running at least a 95% accuracy rate in all forecasts made to date, then they are just more noise cluttering up or skewing data that appraisers have to analyze.

Whatever Veros purported past credibility may or may not have been, forecasting a full half to three quarters into the future under conditions which have NEVER been known to exist is exceptionally irresponsible.

The current financial situation is not the same as the Great Depression nor the Great Recession. The market remains in a state of overall disciplined trading as opposed to the free fall of the Great Depression or the unavailability of money in the Great Recession. Despite legitimate fears, both the American People AND American Financial Markets are (so far) acting rationally. Both confidence and reasonable hope are evident.

The potential outcomes can reflect such great extremes (from near no negative impact on housing markets, all the way to serious losses if jobs don’t return) that forecasting at all is pure speculation and forecasting by metropolitan areas is pure hubris.

I’ve never been a huge fan of Big Data (and posted why in many articles here). The best example I can offer currently on the fallacy of “Big Data” is (are) the study used to forecast the probable deaths in America due to Corona. It has not been remotely accurate despite being updated with data on a daily basis.

Even more, telling was a graph comparison recently televised where a study commissioned by Bill Gates, was the WORST in terms of accuracy among four others. None were remotely close to what actually happened with Covid infection to death rates. NOT REMOTELY!

The single most important survey of data in America, with the nation’s BEST EXPERTS and daily data, and not one study can be relied upon.

Much like AVMs America is just going to keep pulling data until one eventually and coincidentally mirrors actual events. My guess is that study will be identified AFTER the fact rather than being predictive.

In an era where something as intangible as non-sovereign bitcoin is perceived to have value, actual sovereign monetary units; and worldwide confidence in those units as well as the underlying REPUTATION of America runs counter to most studies logarithms.

I’ll rely on my own daily analysis before I will any AVM.

https://www.zerohedge.com/markets/feds-balance-sheet-other-exponential-curve

They had buried QE1 and subsequent rounds in housing. When housing failed to contain it, they buried even more QE in other markets. When repo’s failures hit we knew QE could no longer be contained, but they did it anyways. Now they’re attempting to bury QE infinity in everything across the board. Pay no attention to the actual value of the dollar. Oh, the miracle of central planning.

How does 77,430 unemployment claims in Idaho translate into 7.6% annual appreciation???

This is just further confirmation that there are WAY TOO MANY so called experts who don’t know SH*T about Real Estate. They need to STAY HOME when the crisis ends.

Veros was the first to include forecasting in their models (in 2000 or so).

The historical forecasting models have been pretty reliable. I haven’t seen the current post COVID-19 forecast.