Question

With respect to forecasting real estate returns, appraisals data tends to reflect slow moving averages of past market conditions. One major challenge is that returns calculated from appraisals represent weighted averages of unobservable returns.

True False

Answer 1

Answer-

The statement is True.

When forecasting real estate returns appraisal based indices tendto lag actual transactions because appraisal transactions occur before appraials are performed.

The change in price may not reflect as appraisal values and tends to reflect moving averages of past market conditions. They may be appraised next quarter or later if appraisal is not done every quarter. This causes the the returns calculated to represent weighted averages of returns which are not observed.