Question

Suppose we observe two comparable properties that have both sold twice within the past two years. Property A sold 18 months ago for $550,000 and Property B sold 6 months ago for $525,000. If the two properties were sold today at $625,000 and $560,000, respectively, estimate the change in market conditions (percentage change in price) per month, assuming we equally weight the two properties in our analysis. show work

Answer 1

Solution:-

Property A:

Percentage change in prices = (new price - old price) / old price

Given, new price = $625,000 old price = $550,000

Change in price = (625,000 - 550,000) / 550,000

= $75,000 / $550,000

= 0.1363636 or 13.6363%

Monthly percentage = 13.6363% / 18

= 0.7575%

Property B:

Given, new price = $560,000 , old price = $525,000

Change in price = ($560,000 - $525,000) / $525,000

= $35,000 / $525,000

= 0.06666 or 6.6666%

Monthly percentage = 6.6666% / 6

= 1.1111%

As they have equal weightage = (0.7575% + 1.1111%) / 2

= 1.8686% / 2

= 0.9343%

Therefore the percentage change in price per month is 0.9343%