Glossary
Appraisal
An appraisal is a professional appraiser's 'defensible,' and carefully documented, opinion of value. Appraisals require on-site inspection and include three components: market analysis, replacement cost and an income approach (when applicable). Appraisals are prepared by state-certified professionals.
Appreciation
Appreciation is a broad measure of the increase in value of assets. In terms of residential real estate, appreciation serves as a timely, accurate indicator of price trends at various geographic levels. In any viable modern economy, real estate tends to increase in value over time - if only because of the scarcity of land relative to population growth. Appreciation is used by housing economists as an analytical tool that is useful for estimating changes in the rates of mortgage defaults, prepayments and housing affordability in specific geographic areas. In a sense, it is the opposite of depreciation. Appreciation alone does not reflect the real cost of money and is often adjusted for inflation.
Average Mortgage Rates
A Primary Mortgage Market Survey® data provided by the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) and is based on a survey of lenders each week on the rates and points for their most popular 30-year fixed-rate, 15-year fixed-rate, 5/1 hybrid amortizing adjustable-rate, and 1-year amortizing adjustable rate mortgage products. The survey is based on first-lien prime conventional conforming mortgages with a loan-to-value of 80 percent. In addition, the adjustable-rate mortgage (ARM) products are indexed to constant-maturity U.S. Treasury rates and lenders are asked for the both the initial coupon rate and points as well as the margin on the ARM products.
Broker's Price Opinion
An Opinion of Price rendered by a real estate broker is referred to as a Broker Price Opinion (BPO) and includes the information found in a CMA (Comparable Market Analysis) and additional information about marketability. A BPO is an estimated price given certain conditions and timeframe. Uniquely, BPOs are free from the bias associated with CMAs (seller appeasing brokers) and appraisals (under pressure from bank or the seller). Real estate professionals preparing BPOs are not beholden to anyone and are simply paid for their time and expertise. A BPO is not an appraisal, though appraisers can perform BPOs iin most states.
Comparable Market Analysis (CMA)
The Comparable Market Analysis (CMA) shows exactly what properties that are similar to asubject property have sold for within a recent time frame. These comparables are based on fact, rather than opinion, and referred to as comps. CMAs usually list houses in a locale area that have sold. What houses are listed for on the market is not always a good indication of what their value is, those that have pending sales will only tell you what the listing price is (not what it is going to sell for), and those that have expired because they haven't sold may or may not have been overpriced. The CMA will most likely provide reference information that the subject property can be compared to including: Number of bedrooms and baths, square footage, parking etc...CMA's are usually provided for free by brokers soliciting listings.
Data Source
homeValence.com Basic service report data reflects single-family home pricing as gathered by the U.S. Government from appraisals performed for purchases and refinancings involving Fannie Mae or Freddie Mac securitized mortgages; FHA/VA mortgages are excluded from this data. Housing valuations are determined by licensed (USPAP) appraisers. Data is limited to the mid-1970s for most markets and is updated quarterly; current period appreciation is based on a proprietary algorithm that reasonably predicts current appreciation.
Date
For best results use the date at which a purchase offer was accepted by the seller. If not known, the closing date of a transaction can be used. When using non-transactional valuations as mentioned above, use the date the estimate of value was generated.
Current Valuation
Based on local appreciation rates derived from residential closings and refinancings across the area. The homeValence.comPredicted Value is not very accurate for residential properties that are on the fringes of either rapid appreciation or depreciation but does represent a conservative estimate of the local economy and property values.
Equity
An individual's financial interest in their real estate. It is the difference between the market value and the balance of the loan or mortgage amount still outstanding.
Initial Valuation
The purchase price or other market validated data point such as appraisals, broker price opinions (BPOs) or comparable market analysis (CMA) are commonly used. These are the most accurate valuations from which homeValence.comcan derive appreciated values. In general, the more recent the data the better the accuracy of the predicted value.
LTV
LTV (Loan-to-Value) is a ratio that is computed by dividing the mortgage loan amount by the subject property value. Typically LTV is referenced in terms of the initial mortgage rate offered and when private mortgage insurance is eliminated (typically at 80% LTV).
Market Area
The name of the statistical core-based market area; this area usually includes one or more urbanized hubs and the surrounding suburban areas.
Mean
The average; computed as the sum of all the observed outcomes from the sample divided by the total number of events.
Median
One problem with using the mean, is that it often does not depict the typical outcome. If there is one outcome that is very far from the rest of the data, then the mean will be strongly affected by this outcome (called an outlier). An alternative measure is the median, or middle score. If we have an even number of outcomes then we take the average of the two middles. The median is better for describing the typical value.
Mode
The mode of a set of data is the number with the highest frequency of incidence (most common).
Monthly
Approximate nominal cash value in appreciation in monthly terms; based on annual average appreciation rates.
Nominal Rate (Annual)
Annual nominal rates of return are based on annual local appreciation; they do not reflect the impact of underlying inflation.
Prime Rate
The prime rate runs approximately 300 basis points above the Federal Funds Rate, which is the interest rate that banks charge to each other for overnight loans made to fulfill reserve funding requirements. The Federal Open Market Committee (FOMC) meets eight times per year and sets a target for the Federal Funds Rate. Many other interest rates, including the Prime Rate, are derived from the Federal Funds Rate. For example, the Federal Funds Rate plus a small amount is frequently used for lending to the most creditworthy borrowers today. The Wall Street Journal publishes its own version of the Prime Rate based on a multi-lender bank survey.
Real Rate (Annual)
The real rate is the effective rate of return considering inflation as tracked by the federal government's monthly Consumer Price Index (CPI). homeValence.comuses nationalized 'annual average-to-annual average' CPI rate to provide a broad measure of housing appreciation.
ROI/Return-to-Date (Effective)
The best indicator of actual return; the effective rate reflects both inflation and the cost of money vis-a-vis mortgage interest.
ROI/Return-to-Date (Nominal)
A basic indicator of return on investment; can be expressed annually or to date.
ROI/Return-to-Date (Real)
The real return on investment adjusts for the effect of inflation on money; higher inflation reduces purchase power over time.
Source of Price
homeValence.com prediction results are best when using a market-tested valuation such as a transaction price; if this is not available, a recent appraisal or broker-prepared CMA can be utilized.
Standard Deviation
The standard deviation (related to variance) describes how spread out the data is. If the data all lies close to the mean, then the standard deviation will be small, while if the data is spread out over a large range of values, it will be larger. Having outliers will increase the standard deviation.
Zip Code
The 5-digit United States Postal Service Zip Code where the subject property is located.
An appraisal is a professional appraiser's 'defensible,' and carefully documented, opinion of value. Appraisals require on-site inspection and include three components: market analysis, replacement cost and an income approach (when applicable). Appraisals are prepared by state-certified professionals.
Appreciation
Appreciation is a broad measure of the increase in value of assets. In terms of residential real estate, appreciation serves as a timely, accurate indicator of price trends at various geographic levels. In any viable modern economy, real estate tends to increase in value over time - if only because of the scarcity of land relative to population growth. Appreciation is used by housing economists as an analytical tool that is useful for estimating changes in the rates of mortgage defaults, prepayments and housing affordability in specific geographic areas. In a sense, it is the opposite of depreciation. Appreciation alone does not reflect the real cost of money and is often adjusted for inflation.
Average Mortgage Rates
A Primary Mortgage Market Survey® data provided by the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) and is based on a survey of lenders each week on the rates and points for their most popular 30-year fixed-rate, 15-year fixed-rate, 5/1 hybrid amortizing adjustable-rate, and 1-year amortizing adjustable rate mortgage products. The survey is based on first-lien prime conventional conforming mortgages with a loan-to-value of 80 percent. In addition, the adjustable-rate mortgage (ARM) products are indexed to constant-maturity U.S. Treasury rates and lenders are asked for the both the initial coupon rate and points as well as the margin on the ARM products.
Broker's Price Opinion
An Opinion of Price rendered by a real estate broker is referred to as a Broker Price Opinion (BPO) and includes the information found in a CMA (Comparable Market Analysis) and additional information about marketability. A BPO is an estimated price given certain conditions and timeframe. Uniquely, BPOs are free from the bias associated with CMAs (seller appeasing brokers) and appraisals (under pressure from bank or the seller). Real estate professionals preparing BPOs are not beholden to anyone and are simply paid for their time and expertise. A BPO is not an appraisal, though appraisers can perform BPOs iin most states.
Comparable Market Analysis (CMA)
The Comparable Market Analysis (CMA) shows exactly what properties that are similar to asubject property have sold for within a recent time frame. These comparables are based on fact, rather than opinion, and referred to as comps. CMAs usually list houses in a locale area that have sold. What houses are listed for on the market is not always a good indication of what their value is, those that have pending sales will only tell you what the listing price is (not what it is going to sell for), and those that have expired because they haven't sold may or may not have been overpriced. The CMA will most likely provide reference information that the subject property can be compared to including: Number of bedrooms and baths, square footage, parking etc...CMA's are usually provided for free by brokers soliciting listings.
Data Source
homeValence.com Basic service report data reflects single-family home pricing as gathered by the U.S. Government from appraisals performed for purchases and refinancings involving Fannie Mae or Freddie Mac securitized mortgages; FHA/VA mortgages are excluded from this data. Housing valuations are determined by licensed (USPAP) appraisers. Data is limited to the mid-1970s for most markets and is updated quarterly; current period appreciation is based on a proprietary algorithm that reasonably predicts current appreciation.
Date
For best results use the date at which a purchase offer was accepted by the seller. If not known, the closing date of a transaction can be used. When using non-transactional valuations as mentioned above, use the date the estimate of value was generated.
Current Valuation
Based on local appreciation rates derived from residential closings and refinancings across the area. The homeValence.comPredicted Value is not very accurate for residential properties that are on the fringes of either rapid appreciation or depreciation but does represent a conservative estimate of the local economy and property values.
Equity
An individual's financial interest in their real estate. It is the difference between the market value and the balance of the loan or mortgage amount still outstanding.
Initial Valuation
The purchase price or other market validated data point such as appraisals, broker price opinions (BPOs) or comparable market analysis (CMA) are commonly used. These are the most accurate valuations from which homeValence.comcan derive appreciated values. In general, the more recent the data the better the accuracy of the predicted value.
LTV
LTV (Loan-to-Value) is a ratio that is computed by dividing the mortgage loan amount by the subject property value. Typically LTV is referenced in terms of the initial mortgage rate offered and when private mortgage insurance is eliminated (typically at 80% LTV).
Market Area
The name of the statistical core-based market area; this area usually includes one or more urbanized hubs and the surrounding suburban areas.
Mean
The average; computed as the sum of all the observed outcomes from the sample divided by the total number of events.
Median
One problem with using the mean, is that it often does not depict the typical outcome. If there is one outcome that is very far from the rest of the data, then the mean will be strongly affected by this outcome (called an outlier). An alternative measure is the median, or middle score. If we have an even number of outcomes then we take the average of the two middles. The median is better for describing the typical value.
Mode
The mode of a set of data is the number with the highest frequency of incidence (most common).
Monthly
Approximate nominal cash value in appreciation in monthly terms; based on annual average appreciation rates.
Nominal Rate (Annual)
Annual nominal rates of return are based on annual local appreciation; they do not reflect the impact of underlying inflation.
Prime Rate
The prime rate runs approximately 300 basis points above the Federal Funds Rate, which is the interest rate that banks charge to each other for overnight loans made to fulfill reserve funding requirements. The Federal Open Market Committee (FOMC) meets eight times per year and sets a target for the Federal Funds Rate. Many other interest rates, including the Prime Rate, are derived from the Federal Funds Rate. For example, the Federal Funds Rate plus a small amount is frequently used for lending to the most creditworthy borrowers today. The Wall Street Journal publishes its own version of the Prime Rate based on a multi-lender bank survey.
Real Rate (Annual)
The real rate is the effective rate of return considering inflation as tracked by the federal government's monthly Consumer Price Index (CPI). homeValence.comuses nationalized 'annual average-to-annual average' CPI rate to provide a broad measure of housing appreciation.
ROI/Return-to-Date (Effective)
The best indicator of actual return; the effective rate reflects both inflation and the cost of money vis-a-vis mortgage interest.
ROI/Return-to-Date (Nominal)
A basic indicator of return on investment; can be expressed annually or to date.
ROI/Return-to-Date (Real)
The real return on investment adjusts for the effect of inflation on money; higher inflation reduces purchase power over time.
Source of Price
homeValence.com prediction results are best when using a market-tested valuation such as a transaction price; if this is not available, a recent appraisal or broker-prepared CMA can be utilized.
Standard Deviation
The standard deviation (related to variance) describes how spread out the data is. If the data all lies close to the mean, then the standard deviation will be small, while if the data is spread out over a large range of values, it will be larger. Having outliers will increase the standard deviation.
Zip Code
The 5-digit United States Postal Service Zip Code where the subject property is located.
