URAR Market Analysis Changes: A Guide to the 12-Month Lookback and Time Adjustments
As a residential appraiser, I've spent years navigating the nuances of market analysis. It's the heart of what we do. With all the talk about the UAD 3.6 and the redesigned Uniform Residential Appraisal Report (URAR), it's easy to get caught up in the big structural changes. While many of us are focused on the shift away from form numbers, as I discussed in a previous post, there are equally important changes happening within the report's analytical sections.
Based on recent guidance from Fannie Mae, particularly the SEL-2024-07 announcement, it's clear that our approach to the Market Analysis section is about to become more standardized and rigorous. These aren't just cosmetic updates; they represent a fundamental shift in how we are expected to analyze and present market data. Let’s break down what this means for our day-to-day work.
Standardizing the Playing Field: "Neighborhood" vs. "Market Area"
For years, the terms "neighborhood" and "market area" have been used somewhat interchangeably. The new guidance aims to bring much-needed clarity by implementing standardized definitions for both. The goal, as stated by the GSEs, is to promote consistency and transparency in our reports.
In practice, this means we'll need to be more deliberate in our definitions:
Neighborhood: This refers to the immediate environment of the subject property, where properties have a high degree of similarity and are subject to the same primary influences.
Market Area: This is the broader geographic region from which comparable sales are drawn and market trends are derived. It’s the area where properties are considered competitive with the subject.
Looking at the sample URAR reports, like the SF1 scenario, the "Market Boundary" description becomes a critical field. It will no longer be enough to simply state a city or zip code. We will need to provide a thoughtful, narrative description of the boundaries for our defined market area, justifying why it's the appropriate pool for our analysis.
The 12-Month Lookback for Market Trends
One of the most significant new requirements is the mandate to use a minimum 12-month timeframe to derive the overall market trend. This is a big change from looking at the most recent 90 or 180 days to determine if the market is increasing, stable, or declining.
This requirement forces us to take a longer-term view, smoothing out short-term seasonal fluctuations or temporary market blips. A "Stable" or "Increasing" conclusion in the "Property Value Trend" field will need to be supported by a full year of data. For example, in the SF1 sample report, the Market Commentary notes that "homes are not going up in value due to seasonality. This is typical for 3rd quarter..." This kind of analysis is exactly what the 12-month lookback is designed to encourage and substantiate. Our conclusions will be more robust and less susceptible to challenge when they are based on a comprehensive annual trend.
Show Your Work: Illustrating Time Adjustments
Perhaps the most impactful change is the new requirement to illustrate the methodology used to determine time adjustments for individual comparable sales. The guidance explicitly notes that the overall market trend (derived from the 12-month analysis) may differ from the adjustments applied to specific comparables.
This means the days of applying a simple, unsupported percentage adjustment across the board are over. We will need to "show our work." This could involve:
Paired sales analysis from within the market area.
Regression analysis.
Detailed sales-to-resales analysis.
Graphics or charts that clearly demonstrate the trend for properties similar to the specific comparable being adjusted.
The burden of proof is shifting. It’s not enough to say the market is appreciating by 6% annually and apply a 0.5% monthly adjustment. We will need to document how we arrived at that specific adjustment for that specific comparable. This will likely mean more detailed commentary in the reconciliation and potentially new exhibits in our addenda to support our conclusions.
When Does This Take Effect?
According to Fannie Mae, lenders are encouraged to implement these policy changes immediately, but they must do so for all loans with applications dated on or after February 4, 2025. This is a hard deadline. As appraisers, we can expect to see these requirements reflected in assignment letters and client expectations very soon.
These changes to the market analysis section are a clear step toward more defensible and transparent appraisals. While it requires a more disciplined and documented approach, it ultimately reinforces the value of our expertise. As these requirements become more data-intensive, tools that can help automate the gathering and visualization of market data, like the Market Analysis section in the Valuemate app, could become invaluable in helping us support our conclusions efficiently and effectively.