# AVM Glossary

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• Harmonic Mean RatioThe reciprocal of the arithmetic mean of the reciprocals of each value in the data set. The harmonic mean ratio is less affected by extreme values in the data set than the arithmetic mean or the geometric mean.
• Hedonic ModelThe term hedonic model broadly refers to a class of property-specific AVMs that examine housing characteristics (both physical and locational) to estimate a subject’s market value. These models operate under the assumption that a house is a composite good comprising many traits that appeal to consumers in varying degrees. Through the application of direct market and comparable sales analyses, hedonic AVMs attempt to quantify the extent to which certain attributes contribute to a property’s overall value, and then develop value conclusions based on these findings.
• Hedonic Price IndexAn analytical model used to quantify the pricing tradeoff between measurable product capacity and intangible attributes such as an amenity feature, design, or reputation. See also isoquant.
• Hedonic pricingHedonic pricing attempts to take observations on the overall good or service and obtain implicit prices for the goods and services. Prices are measured in terms of quantity and quality. When valuing real property the spatial attributes and property specific attributes are valued in a single model. Calibration of the attribute components is performed statistically by regressing the overall price onto the characteristics.
• Hedonic RegressionA multivariate analysis that predicts and explains the value of individual characteristics bundled together to form a good or service; based on the marginal utility of good character and the desirability of that good.
• HeterogeneousUnlike; without interrelation. The opposite of homogeneous.
• Heteroscedasticity Non-constant variance, specifically, in regression analysis a tendency for the absolute errors to increase (fan out) as the dependent variable increases.
• Highest and Best UseA principle of appraisal and assessment requiring that each property be appraised as though it were being put to its most profitable use (highest possible present net worth), given probable legal, physical, and financial constraints. The principle entails first identifying the most appropriate market and, second, the most profitable use within that market. The concept is most commonly discussed in connection with underutilized land.
• HistogramA bar chart or graph of a frequency distribution in which the frequencies of the various classes are indicated by horizontal or vertical bars whose lengths are proportional to the number or percentage of observations in each class.
• Historical AgeThe number of years elapsed since an original structure was built. Synonyms are actual age and chronological age. See cost, original.
• Hit RateThe percentage of properties that have been valued by the AVM. See also "Gross Hit Rate" and "Adjusted Hit Rate."
• Hold-out samplePart of a set of data set aside for testing the results of analysis.
• Holdout DatasetAlso called a "hold-out sample." A dataset drawn from the same population as the training dataset that is not used to calculate the AVM valuations. The holdout dataset is used for testing. Cross-validation techniques allow sales in the training dataset to be reused as the holdout set.
• Homogeneous Possessing the quality of being alike in nature and therefore comparable with respect to the parts or elements; said of data if two or more sets of data seem drawn from the same population; also said of data if the data are of the same type (that is, if counts, ranks, and measures are not all mixed together).
• House Price IndexA model that provides an estimate of a property’s value as a function of time. HPIs find the house price path most consistent with observed appreciation or depreciation rates in a region. Typically referred to as an “index of home price appreciation,” indexes are mathematical algorithms that ad- just property values up or down to reflect price changes over time. These models are price-specific and not property-specific.
• HypothesisA statement in inferential statistics the truth of which one is interested in determining. The usual procedure is to state what one chooses to accept in the absence of sufficient evidence to the contrary (the statement is called the null hypothesis), specify the relationship or statement to be proved (the alternative hypothesis), and analyze the available data to determine whether the null hypothesis can be rejected (and hence the alternative hypothesis accepted) at some confidence level.

Sources:

a)       AVMetrics

b)      AVMs 201: A Practical Guide to the Implementation of Automated Valuation Models, Jim Kirchmeyer, 2008.

c)       IAAO 2015, Glossary for Property Appraisal and Assessment, 2015. (2013 online: https://www.iaao.org/media/Pubs/IAAO_GLOSSARY.pdf )

d)      Collateral Assessment & Technologies Committee, Summary of Definitions & Terms, 2006.

e)      Joint Industry Task Force on AVMs, IAAO Standard on AVM Glossary, September 2003. https://www.iaao.org/media/standards/AVM_STANDARD.pdf

f)        Appraisal Institute, Joint Industry Task Force on Automated Valuation Models, Work Group Terminology, 2005.

g) Merriam-Webster (https://www.merriam-webster.com/)