What’s all this stuff about risk?
By George Dell
We seem to be hearing stuff about risk recently. Why?
Back in the old days, before internet but after the wheel – It was my challenge as a new appraiser to scratch together four or five comps, then put three of them on a form, or perhaps even all five on a table. We called the table a ‘grid,’ presumably because it looked like the grid on a bird cage.
I soon discovered I was free to fly around inside the grid cage all I wanted. I adjusted to what I had. I learned to live inside the cage.
Then flying electrons came. They flew right through the grid. There were many. Sometimes even a dozen or more. All claiming to be comp messages. It was too much. I had the five. Should be enough. Yep. That’s what my trainer said. That’s what my appraiser education said. And sure enough, it was on my test for my new appraiser license…
Now, we worry about What is Risk for Appraisers?
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My comment: Next month’s paid Appraisal Today will have a long article, “Adjust your adjustment, or adjust your attitude? The Hype and the Reality” by George Dell. Very interesting!
Covid-19 Residential Appraisers Tips on Staying Safe
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NOTE: Please scroll down to read the other sections of this long blog post on Fees, data standards, Vacation homes, Cost Approach, mortgage origination stats, etc.
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Fascinating, unusual and weird Islands all over the world!! Just For Fun and a Brief Break From Reality – what we all need!!
Remote, isolated, generally under-populated, islands are have a way of incubating wonder. Whether it’s one of the most remote bars on the planet 156, a shockingly large snake population 176, or a collection of ramshackle cliff dwellings made of recycled materials 96, islands all over the planet hold some incredible curiosities.
click here to Scroll down the page, see the photos and read the descriptions.
My comment: I live on an island. They are very, very different than the mainland. We hate to leave our island!!! I love the Cat Island!!
Data Standards are Critical for the Mortgage Industry’s Digital Future
Excerpt from White Paper: Without Data Standards, the Mortgage Industry Doesn’t Go Digital: this new white paper describes the importance of data standards for our industry’s future. Lenders can help deliver the modern digital experience borrowers want by adopting data standards to drive efficiency, consistency, and quality in data across and within the industry.
click here for Overall analysis (short, but a bit technical)
click here for Link to White Paper – worth reading
My comments: I have been following data standards for a long time. My first meetings on appraisal standardization was many years ago when we were trying to decide what choices to put on “pull down” menus. Plus early meetings of MISMO groups.
Next month’s paid Appraisal Today will have an article on what Fannie is really up to on appraisal modernization (forms and UAD) and bifurcated appraisals. UAD data standards and updating MISMO are critical. Fannie is way, way far behind, as we all know. I last wrote about it in June 2019. There have been changes.
Appraisal Fee Transparency
By Jonathan Miller
Excerpt: Bill H.R.3619 has left the House and is now ready for consideration in the Senate. There are a number of key issues presented in this bill. Three of them jumped out at me:
SEC. 3. Trainee appraisers.
SEC. 5. Requirement to disclose appraisal fees
SEC. 6. Inclusion of designee of Secretary of Veterans Affairs on Appraisal Subcommittee. This helps address the pro-banking bias on the ASC board as I discussed
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My comment: No one knows what will happen, but if no one says anything, nothing will change! I read Jonathan Miller’s Housing Notes every week but don’t link to it often because appraisal comments are near the end of the long list of graphs, etc. Worth subscribing to though. I love the fun stuff, of course ;>
Residential Cost Approach Part 2 – Reconciliation, Obsolescence, Sample Comments
By Denis Desaix, MAI, SRA
Excerpt: Summary of important issues
* The Cost Approach is being required by more and more clients; even in cases where it isn’t necessary for credible assignment results
* The USPAP requires appraisers to complete each analysis in a competent manner
* The Cost Approach, even in cases where not necessary and not given any consideration in the final value reconciliation, can be completed and reported
without creating a “misleading” report (See USPAP FAQ #290)
* The reconciliation is the section where the appraiser should communicate to the client his/her evaluation and ultimately the consideration given to the Cost Approach in concluding the final opinion of value
* The quality of data (absolute and relative to the other approaches) should be discussed in the reconciliation; the quality of data determines how much consideration the Cost Approach should be given.
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Rising Financial Wealth Boosts Demand for Vacation Homes
Excerpt: Between 2013 to 2018, the median sales price in vacation home counties increased at a slightly higher pace of 36% compared to the pace of increase of all existing and new homes sold,1 at 31%. Median price increases occurred across both expensive and inexpensive areas. The counties with the highest price increases during this five-year span were in three states: Pennsylvania, which includes Pike and Monroe counties; Wisconsin, which contains Price and Washburn counties; and Massachusetts, which includes Nantucket.
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Airbnb takes over 20% of vacation housing in Sedona Arizona
Excerpt: In Sedona, investors are moving into the neighborhoods to buy up homes for rentals, driving up housing costs. In fact, it is now estimated that about 1,000 homes, or 20% of the city’s total vacation housing inventory, are being used as short-term vacation rentals, according to an article by Lorraine Longhi for azcentral.
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My comment: Airbnb is a big factor in many vacation areas. Thanks to Julie Freiss, a very savvy appraiser and a regular paid Appraisal Today contributor or this info!!. She lives in Sedona.
Refi activity triples on low rates
Excerpt: “Despite a slight rise in mortgage rates last week, refinance applications increased 4% and were 199% higher than a year ago. Purchase applications slowed for the second week in a row,” Kan said. “While near term economic uncertainty is still a factor, other fundamental issues, such as a lack of housing inventory in many markets, is preventing purchase activity from meaningfully rising. However, purchase applications were still much higher than a year ago.”
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My comment: Lender appraisals have been driven by refis and interest rates since Fannie and Freddie started securitizing loans in the 1970s. You may want to consider non lender work and get out of the AMC Rat Race sometimes. Or have business when refis die as they always do.>Note: I publish a graph of this data every month in my paid monthly newsletter, Appraisal Today. For more information or get a FREE sample issue go to https://www.appraisaltoday.com/products.htm or send an email to firstname.lastname@example.org . Or call 800-839-0227, MTW 7AM to noon, Pacific time.
Mortgage applications increased 0.5 percent from one week earlier,
WASHINGTON, D.C. (October 16, 2019) – Mortgage applications increased 0.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 11, 2019.
The Market Composite Index, a measure of mortgage loan application volume, increased 0.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1 percent compared with the previous week. The Refinance Index increased 4 percent from the previous week and was 199 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 12 percent higher than the same week one year ago.
“The ongoing interest rate volatility is impacting a borrowers’ ability to lock in the lowest rate possible. Despite a slight rise in mortgage rates last week, refinance applications increased 4 percent and were 199 percent higher than a year ago,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting. “Purchase applications slowed for the second week in a row. While near term economic uncertainty is still a factor, other fundamental issues, such as a lack of housing inventory in many markets, is preventing purchase activity from meaningfully rising. However, purchase applications were still much higher than a year ago. This is a reminder that the purchase environment in 2019 continues to be stronger than in 2018.”
The refinance share of mortgage activity increased to 62.2 percent of total applications from 60.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.5 percent of total applications.
The FHA share of total applications increased to 11.3 percent from 10.3 percent the week prior. The VA share of total applications increased to 12.9 percent from 12.3 percent the week prior. The USDA share of total applications decreased to 0.4 percent from 0.5 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 3.92 percent from 3.90 percent, with points decreasing to 0.35 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) remained unchanged at 3.90 percent, with points decreasing to 0.23 from 0.28 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.77 percent from 3.75 percent, with points decreasing to 0.19 from 0.29 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.32 percent from 3.35 percent, with points increasing to 0.31 from 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs increased to 3.37 percent from 3.25 percent, with points decreasing to 0.23 from 0.34 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.
Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
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