This is a recording of part one of a three part series on the Devolution of Appraisal Theory and Process
Contrary to long held beliefs, long term home price appreciation rates are modest and averages mask volatility. History has shown that excessive leverage promotes volatility. Further complicating the home ownership equation is the lack of diversification when one’s wealth is in a single asset. As a result Professor Karl Case recently observed: the housing market is a ‘crapshoot’.
The key point of contention was framed first by Richard Hurd in 1903 and again by Frederick Babcock, chief appraiser of FHA, in 1938: “[V]valuation is sometimes hypothetical in character, especially under market conditions where abnormalities in price levels indicate the presence of serious quantitative differentials the two value concepts [warranted value and available market price]. Marked differences between “available market prices” and “values” will be evident under both boom and depression conditions of market.”
In this series, Edward Pinto, codirector and chief risk officer of AEI’s International Center on Housing Risk, has done extensive research on the history of appraisal. He will trace first the evolution from 1900 to the 1960s and then the devolution of appraisal theory and process from the 1970s onward. Join us to discover the long lost origins of appraisal theory and practice, information you won’t find in any modern text book, but which is just as relevant today as when originally written.