CRU Market Analysis & Trends 2 — Questions and Answers
Question 1: Which indicator best reflects short-term supply pressure in a residential market?
- Months of housing supply (Correct answer)
- 30-year fixed mortgage rate
- Consumer Price Index
- Unemployment rate
Correct answer: Months of housing supply
Months of housing supply measures how long it would take to sell current inventory at the prevailing sales pace, directly reflecting supply pressure.
Question 2: A neighborhood where 40% of sales are REO properties would most likely be classified as a:
- Stable market
- Distressed market (Correct answer)
- Seller's market
- Equilibrium market
Correct answer: Distressed market
High concentrations of REO (bank-owned) sales indicate widespread distress, and appraisers must identify this condition in their market analysis.
Question 3: When analyzing absorption rate, an underwriter is primarily measuring:
- How quickly listed homes are selling (Correct answer)
- The percentage of homes with FHA financing
- Average days on market for expired listings
- Ratio of cash buyers to financed buyers
Correct answer: How quickly listed homes are selling
Absorption rate measures the rate at which available homes are sold during a given time period, indicating market velocity.
Question 4: In a rapidly appreciating market, an underwriter should be most concerned about which appraisal risk?
- Overstated land value
- Comparables that lag actual market conditions (Correct answer)
- Excessive cost approach adjustments
- Income approach overweighting
Correct answer: Comparables that lag actual market conditions
In fast-moving markets, recently closed sales used as comparables may not capture current price levels, leading appraisals to understate value or create time-adjustment disputes.
Question 5: Which of the following best describes a 'buyer's market' condition relevant to CRU underwriting?
- Inventory below 3 months supply
- Multiple offer situations are common
- Inventory exceeds 6 months supply (Correct answer)
- Days on market under 30 days
Correct answer: Inventory exceeds 6 months supply
A buyer's market is generally defined by inventory levels above 6 months, giving buyers negotiating leverage and indicating downward price pressure.
Question 6: When reviewing a market conditions addendum (Form 1004MC), what does a declining trend in seller concessions typically signal?
- Weakening buyer demand
- Strengthening seller's market (Correct answer)
- Increasing foreclosure activity
- Rising mortgage rates
Correct answer: Strengthening seller's market
Declining seller concessions indicate sellers have less need to incentivize buyers, signaling stronger demand and a seller-favored market.
Question 7: A CRU underwriter notes that median list price is rising while median sale price is flat. This divergence most likely indicates:
- Sellers are overpricing and buyers are resisting (Correct answer)
- Appraisers are under-valuing properties
- Market is transitioning to a seller's market
- Mortgage fraud is occurring
Correct answer: Sellers are overpricing and buyers are resisting
When list prices rise faster than actual sale prices, it typically means sellers have unrealistic expectations and buyers — or appraisals — are not supporting those prices.
CRU Market Analysis & Trends 2
Which indicator best reflects short-term supply pressure in a residential market?