What's my house worth?

And due to the recent malaise in the real estate industry and the huge number of foreclosure homes sitting on the market, the question has been elevated to a cry for help.

Here's an e-mail I received recently:

Q: How does one find the "appreciation" percentage for various areas in Atlanta?  Everyone I speak with merely says "it's about 3 percent per year."  When I ask how they know that I hear "it's always about the same."

I'm embarrassed to add that I'm a realtor and don't know how to find this very important figure. Can you point me in the right direction?

A: Let's get back to basics. In the real world, we try to estimate market value by examining what comparable homes sold for recently in the immediate area. But unless that exact house sold a few months ago and now has resold again, we can't truly know what price it would bring if offered today.

The honest answer to the question is that no one knows for sure what the appreciation is for specific areas of Atlanta, because there is simply no solid method for measuring that number.

About the best we can do is try to measure sales trends in neighborhoods, and then hope to gain some idea of the direction prices seem to be moving.

But the real problem is the variables. Let's look at just a couple:

* The house on the land.

Even in so-called "cookie-cutter" subdivisions where every house appears alike on the outside, some will be in better condition than others. You might counter that in a new home subdivision, all the houses are new and therefore in "brand new" condition, and you would be right.

But even in that case, builders always offer a variety of upgrades, from windows to decks and from carpeting to finished attic rooms. The array of finish selections can be dizzying, and can run the price up by literally thousands of dollars. And most of these upgrades cannot be seen from the street, making them invisible for comparison purposes.

In a resale community, the use of comparable sales becomes even more complex as we try to take into account all the changes and improvements made during the life of the house. Owners routinely add rooms and baths to their homes and forget to inform the county, so these additions are often not a part of the public record.

* The motivation levels of the buyer and the seller.

One of the keys to accurately estimating market value is the assumption that the buyer and seller are both knowledgeable of the marketplace, and that each is under no undue pressure to buy or sell respectively.

While this set of circumstances can reasonably be applied to a large number of sales data, it becomes more difficult as the number of sales examined decreases.

So, for example, if you are trying to determine how much homes, say, in Georgia have appreciated over a period of time, the motivation of the parties can be assumed to be average. But if you only have one or two (or even ten or twelve) sales in a neighborhood over the past year, the motivation of the parties becomes critical.

A good example is a distressed sale, such as a bank-owned post foreclosure property in poor condition. The bank is under substantial pressure to get the house sold, and may be forced to accept much less than a seller might get if the house were cleaned up and marketed properly. Yet these sales are included in appraisal reports every day in all parts of the country.

To further complicate matters, there are literally dozens of variable factors making the estimate of a market's appreciation percentage difficult. The good news is that the larger the sample of data, the more confidence we can have in the conclusions of the study.

Recognizing this fact, the Office of Federal Housing Enterprise Oversight (www.OFHEO.gov) conducts a quarterly study of more than 35.99 million "repeat transaction pairs." The goal is to actually track repeat sales or refinancings over an extended period of time. While their methodology is beyond our scope here, you should know that no other "Home Price Index" available even comes close to matching the volume of data analyzed.

That's why we should all be pleased at the most recent estimate of price movement in Georgia and the Atlanta area by that office.

The OFHEO Home Price Index for Georgia shows that, for the twelve month period ending June 30 of this year, the average home price increased statewide by 1.11 percent. Likewise, the study shows that the average home in the Atlanta metro area increased in value 0.02 percent for the same one-year period. And while that's not much of an increase, at least it's not a negative number.

So unless you can find repeat transactions in your own neighborhood and make actual eyewitness comparisons of the properties involved, it is extremely difficult to gauge price movements in small communities.

Certainly you can (and should) stay up to date on sales activity in your community, and you can chart overall trends of selling prices over time. And yes, this data can give you an idea of the overall direction of price movements in a neighborhood.

But trying to track down specific numbers that apply to all homes in a neighborhood is likely a waste of your time. There just aren't enough repeat transactions in most neighborhoods to allow you a valid comparison.