Comments on "Price Versus Fundamentals--from Bubbles to Distressed Markets" (Letters TO THE Editor) (Letter to the Editor‪)‬

Having just completed reading the article, "Price versus Fundamentals-From Bubbles to Distressed Markets" (Spring 2011), I am compelled to write a reply. The stated purpose of the article is to start a discussion about the quoted statements on value by Maclin and Buffet, and about those statements' "implications for real estate valuation." The article suggests that "both statements refer to hyper transaction markets with many purchasers buying on speculation in anticipation of rapid transaction price appreciation." In this letter, I will address the purpose of the article and the article's content. The Maclin statement on the real estate market, "What needs to happen now is difficult, but we need to get real estate back to the values that it's worth," was made in 2010. This statement as quoted, however, does not have any identifiable meaning or implications for real estate valuation or any direct reference to a hyper transaction market. To take anything from the statement, one needs to read something into it without any assurance that what is read in is what Maclin meant. With reference to the 2010 market, there is no question that compared to 2006-2007 the real estate market was very depressed. Therefore, what the statement may have intended to convey was the observation that the market was very difficult and that what was needed to restore market health was a return to the previous value/price levels. Real estate appraisers may want to contemplate what would need to happen in order for the market to be restored to previous levels, but past pricing in a hyper transaction market should have absolutely no influence on measured market value today. The 2010 market resulted from the financial excesses prior to 2008, and while previous prices are historically interesting, they should not influence current market value or appraisal theory.