7.6.16 Market Analysis

A. The appraisal must also contain, depending on the complexity of the project and prevailing market conditions, a Level B or C Market Analysis of the local market with an emphasis on multifamily housing to determine the ability of an existing project to continue usage as multifamily housing. In the case of proposed construction or substantial rehabilitation, the purpose is to determine overall feasibility and demand for new housing units. The following is a brief outline of a Level C analysis:

1. Location. This includes a general description, specific analyses of site linkages and urban growth determinants, and detailed competitive location rating.

2. Demand Analysis. This includes a discussion of general evidence of sales/leasing activity, general city/area growth trends, market absorption, demand and need forecast based on population, employment and income, and a demand forecast of the subject market segment.

3. Competitive Supply Analysis. This includes vacancy rates for comparables and from market surveys (secondary data), field research on all competitive and proposed properties, building permit analysis, identification of proposed sites, and a detailed competitive amenities rating.

B. The detailed requirements for performing a Level B or C analysis can be found in “Market Analysis for Real Estate” published by the Appraisal Institute. In general, a stable market evidenced by recent sales, and balanced supply and demand, is an indication that a lower level “B” analysis will be sufficient. If there is uncertainty in determining the level of analysis, the Lender and appraiser should jointly consult with the Regional Center or Satellite Office.

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Chapter 7 Valuation & Market Analysis 7.7 Estimating Project Income

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