FEBRUARY 3, 2023 – As I review appraisal reports, I continue to see appraisers remain in the fantasy AppraisalLand regarding cap rates and values. When asked about declining values and increasing cap rates, I get the NIMBY reply. No decline in our market. Must be occurring everywhere else:)
Although the GreenStreet CPPI is for investment-grade properties, it is still an indicator of the overall CRE market.

file:///C:/Users/Owner/Desktop/2023%202%20Feb%202%20-%20GreenStreet%20CPPI%20update.pdf

Overall prices have declined back to pre-pandemic levels. Have you been adjusting 2021 and 2022 sale prices downward at least 10%-20%? Have you been using cap rates 75-100bp higher than those shown in 2021 and 2022 sales? Are you forecasting residential lot and home price declines of 10%-20%+ (should be WAY more for finished lots) over the next 1-2 years? Have you adjusted absorption rates in 2022 downward 50%-75%+?
As me and my wife have joked for decades, in AppraisalLand every subdivision sells out quickly….office buildings in markets that literally haven’t seen vacancy rates below 10% since the 1980’s will lease up to 95%…on and on. Vacant land that has been for sale for 30 years will have a marketing time of 12 months. AppraisalLand is a very, very happy place to be in lol
It is up to reviewers to start pushing back hard on conclusions that don’t reflect current and future market conditions. Market Value is based on looking forward thru the windshield, not looking in the rear-view mirror. Data from the rear-view mirror must be adjusted to reflect current and future market conditions.
The above has been a broken record for my entire 36-year career. You would think the industry would learn from past cycles and change quickly when the market changes. It is not acceptable to wait until sales data is available to show the decline has occurred. Sales volume dries up in a declining market. By the time you have sales data the bottom has probably occurred and the market is starting to turn up. Reports like this one from GreenStreet provide the data needed to reflect current and upcoming market conditions. The data proving a decline has occurred and may continue is readily available. Use it.
I have a dream that one day AppraisalLand will no longer exist.
Shalom,
The Mann