In the ever-evolving real estate market, insights from industry leaders can help provide valuable insights for investors. Recently, at the IMN Single Family Rental Forum West conference, Kade Clark, SVP Valuation Services for homegenius Real Estate, participated in a thought-provoking panel, “Housing Valuation: Are We At a Peak and You Should Sell or Can Values Still Rise,” that delved deep into housing valuations.

Market Landscape

Panelist, Rich DeNicola, of Anywhere Real Estate, provided valuable background on the current market landscape to kick off the panel, noting that according to the National Association of Realtors® (NAR) October report^[i], the median home sale price stands above $400,000 with projections suggesting a potential price increase in 2025. NAR^[ii] anticipates existing home sales to rise by 9% and new home sales to rise by 11% in the coming year, continuing a modest but steady growth trend.

Valuation Tools

Kade provided a comprehensive exploration of valuation methodologies for real estate investors. One of the key discussions centered on the various valuation tools at investors' disposal, such as Automated Valuation Models (AVMs). AVMs can be used as an initial screening method, offering a quick "gut check" on property values. He highlighted that institutional clients often use AVMs to assess potential value drops, particularly when properties struggle to rent or remain on the market for extended periods.

Diving deeper into the valuation landscape, Kade emphasized the importance of Broker Price Opinions (BPOs), known as the industry's gold standard. These opinions, which may be more cost-effective than full appraisals and generally are delivered within five business days, help provide crucial insights for refreshing property portfolios. When asked whether rental addendums for BPOs exist, Kade noted that they do, and that homegenius Real Estate was one of the first companies to create one. He further shared insights into the importance of understanding rental positioning, warning about the risks of over-pricing rental properties. Such missteps can lead to extended vacancy periods and substantial holding costs, making valuation not just a matter of numbers, but of strategic market positioning.

Scatter Sites vs Build-to-Rent (BTR) Communities

Kade stressed the valuation approach required for different property types, distinguishing between scatter sites and BTR communities. While valuations for scatter sites tend to follow the standard ordering and QC process, BTR communities demand more sophisticated valuation methods. He warned against the pitfall of assigning valuations to multiple agents, which could result in inconsistent assessments, and instead advocates for using the same agent to ensure consistency—especially in unique community developments where traditional comparables might fall short.

Market Dynamics and Rental Positioning

Delving deeper into the challenges for emerging BTR neighborhoods, Kade highlighted the critical importance of local market knowledge, cautioning that inappropriate comparables could lead to significant valuation errors—potentially under or over-valuing properties, both of which could negatively impact an investor's portfolio. He emphasized that depending on an investor's risk appetite, that appraisers possess a unique advantage in these communities by their ability to utilize one of the 3 USPAP-approved valuation approaches whichever is the most applicable to determine more accurate property values.  Those valuation approaches consist of the sale comparison approach, cost approach, and income approach.

Importance of Accurate Valuation Estimates

The panel highlighted the need for accurate property valuation estimates in today's real estate landscape, as improper pricing strategy may lead to higher holding costs or the inability to maximize a portfolio. Localized factors can dramatically impact property value estimates, from community amenities to rental positioning. By leveraging advanced tools like Automated Valuation Models (AVMs), Broker Price Opinions (BPOs), and hybrid appraisals, while also maintaining an awareness of broader economic trends, real estate investors can develop more strategic, flexible valuation approaches that protect and potentially enhance portfolio performance in an increasingly dynamic market.

[i] https://www.nar.realtor/newsroom/existing-home-sales-grew-3-4-in-october-first-year-over-year-gain-since-july-2021
[ii] https://www.nar.realtor/magazine/real-estate-news/whats-next-for-the-2025-housing-market

Valuation services provided by homegenius Real Estate LLC and homegenius Real Estate Inc. (collectively dba homegenius Real Estate). 7730 South Union Park Avenue, Suite 550, Midvale, UT 84047. Tel: 877-500-1415. homegenius Real Estate LLC and its wholly owned subsidiary are licensed in every state and the District of Columbia.