Fair Market Rents Trend Component Modeling Technical Report: Alternative Methods for Calculating Fair Market Rents in Rental Markets with Rapidly Rising Rents
In its report, UrbanSim Inc. recommended two main changes to the FMR calculation methodology with the goal of better capturing rapidly rising rents. The first recommended change is to the trend factor forecast methodology. The authors selected multiple housing and demographic variables to include in the analysis with the rent and utilities CPI components. They compared a vector error correction model (VECM) with a pure time series ARMA model and an ARIMA model that included exogenous factors. The second recommended change is to update FMRs in markets with extreme price movements on a more frequent basis. The authors recommended using data from the private company Apartment List—which is comprehensive, updated frequently, and based on market data rather than surveys—with a band-pass filtering approach to identify markets with rapidly rising rents.
Related FMR studies from 2023:
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