An appraiser finds a sale and re-sale 18 months apart indicating a 1.5% monthly decrease in value. What might be a problem with using this market conditions adjustment?

• A. It overstates the decline
• B. This adjustment assumes a steady decline across the entire period, which may or may not be accurate
• C. It ignores seasonal variation
• D. It cannot be annualized

Answer: (B)

The key idea here is that using a market conditions adjustment derived from an 18-month span with a constant monthly change treats value as if it moved in a smooth, unvarying path. In real markets, price changes don’t usually happen in a perfectly steady rhythm; they bounce up and down with demand shifts, financing conditions, and other factors. By pinning the adjustment to a fixed 1.5% decline each month, you’re implicitly assuming the decline is uniform over the entire period, which may not reflect what actually occurred. That mismatch between the assumed steady path and the real, often irregular, market movement is what makes this type of adjustment potentially unreliable. Seasonal variation and annualizing aren’t the primary issue here—the main concern is the assumption of a constant rate of decline across the whole interval.