You are attempting to arrive at what the monthly rate of change that has recentl
ID: 3404072 • Letter: Y
Question
You are attempting to arrive at what the monthly rate of change that has recently occurred in the real estate market. In doing some market research, you find two properties that have sold twice within the last two years. Property A sold 22 months ago for $98,500; it sold last week for $108,000. Property B sold 20 months ago for $105,000; it sold two weeks ago for $113,500.
a. What is the monthly rate of change for Property A?
b. What is the monthly rate of change for Property B?
c. Using these two properties, what is the average monthly rate of change that can be used in adjusting comparable properties?
d. A comparable property sold 10 months ago for $102,500. Use the information above to calculate the adjusted price of this comparable.
Explanation / Answer
a) Rate of change of property A
=> (108000-98500)/98500
=> 0.09644
Chage in monthly rate = 0.09644/22 = 0.004383 or 0.4383%
b) Rate of change of property B
=> (113500-105000)/105000
=> 0.08095
Chage in monthly rate = 0.08095/20 = 0.00405 or 0.405%
c) Average monthly change = (0.405+0.4383)/2 = 0.42165%
d) Adjusted price = 102500 + 0.42165% * 10 * 102500
=> 106821.95$
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