About
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Careers
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Contact
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Services Industries Knowledge Center People

About Our Services

We offer tailored solutions — whether private company or owner; public or private fund, adviser or fund service provider; or Fortune 1000 enterprise. Learn how we can help you.

Learn More

Assurance Services

Employee Benefit Plan Audits Internal Controls Investment Company Audits Private Company Audits SOC Readiness & Compliance

Tax Services

Federal Tax Planning & Compliance High Net Worth & Wealth Transfer International Filings & Structuring Investment Company Tax State & Local Tax Tax Credits & Incentives Transaction Tax Planning

Advisory Services

Business Valuations Data & Insights Digital Finance Solutions IT Strategy & Implementation M&A Advisory Outsourced Accounting Solutions Transaction Services Turnaround & Restructuring

Our Industry Expertise

Our industry experience means you can find professionals who speak your language and bring earned insights to the table. Learn how we can help you.

Learn More

Key Industries

Digital Assets Investment Companies Manufacturing Private Companies Private Equity Real Estate & Construction Technology & Life Science
VIEW THE COMPLETE LIST

Knowledge Center

Our team wants to help your team stay up to date. Browse our thought leadership, events and news for insights and a point of view on business-critical topics.

Learn More

Insights

Browse valuable articles and publications our experts have written to help you and your organization answer key questions — and consider new ones.

Read Our Insights

Events

Join us in person and online for events that address timely topics and key business considerations.

Explore Our Events

News

Find out what is happening at Cohen & Company, from industry recognitions and growth updates, to where we are contributing to important media stories.

Read Our News
People
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Back to Insights

Not Just a Trend: Market Analysis in Property Valuation

August 23, 2017 Real Estate & Construction

Appraisers are increasingly incorporating trend analysis when valuing real estate. Property owners, as well as potential buyers, need to understand the role trend analysis (also known as market analysis) can play when determining value. 

Trend Analysis

Which amenities and characteristics attract tenants or potential buyers to a property — or, conversely, turn them off? Real estate appraisers know that something as simple as, say, the side of the street a property is located on or a development’s proximity to public transportation can have a dramatic impact on its value. The desirability of “hot” features, such as health club amenities, green building certification or smart technologies, may vary over time — especially as macroeconomic conditions ebb and flow.
 
Trend analysis is a quantitative technique appraisers use to identify and measure trends in the marketplace. Using spreadsheets and software tools, appraisers can sort through large sets of comparable data and find relationships between sales price and 1) market conditions and 2) property-specific characteristics that drive value. These trends can be used to predict future performance or support value adjustments for market conditions. Trend analysis is especially useful when minimal sales data on highly comparable properties is available but a broad database of properties with less similar properties can be tapped.
 
The Appraisal Institute (AI) calls market analysis a “critical step” in the appraisal process, particularly when it comes to the property’s highest and best use. According to the AI, market analysis should consider market participants’ beliefs about what will happen to market conditions in the future as well as current and expected changes in supply and demand. 

Sampling of Relevant Factors

The AI is careful to distinguish between factors that cause change and symptoms of change. The latter include changes in vacancy rates, falling or rising property prices or sales prices exceeding list prices.
 
Change-causing factors may be capital-based or user-based. Capital-based factors may be related to changes in monetary policy, government spending, taxation and interest rates and an overabundance of investment capital producing increased competition. User-based factors relate to changes in migration patterns, population shifts, economic shocks, technological developments, natural disasters, overbuilding and changes in affluence and income distribution. Regardless of the factors analyzed, appraisers should segment the market to better reflect the subject property. Trends for a specific neighborhood are likely to be more helpful than broader market trends.
 
While trend analysis is a critical part of an accurate valuation, remember that the resulting value is an estimate as of a particular date. As the AI warns, trends, like other factors that affect value, can change subsequent to the valuation date, changing future value along with them.
 
Contact Josh Lefcowitz at jlefcowitz@cohencpa.com or a member of your service team for further discussion.
 

Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.
 
 

Sign Up for Our Emails & Events

Receive insights from our specialists in a variety of areas and timely information on upcoming events directly to your inbox as they go live in our online Knowledge Center.

Subscribe Today
Subscribe to our newsletter
About Contact Submit RFP Privacy Policy
LinkedIn Twitter Facebook
© 2023 Cohen & Company