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What are Pass through Bedrooms for Appraisals
Excerpts: This may not be a major problem if the house has sufficient bedrooms to match what is typical and expected in the neighborhood. It can have a negative impact on the marketability of the home if this arrangement reduces the number of usable bedrooms from what is typical.
The floor plan layout of a home can have an impact on its market value: The impact on value is determined from market data and how buyers perceive it. Did the home sell for less because it has a different floor plan than what is typical and expected?
The cost to fix can vary: Depending on the current floor plan configuration and the location of the bedroom in relation to other rooms the cost can vary widely and this should be taken into consideration when comparing it to the value added by fixing the problem.
Written for home owners with a good discussion of cost to cure vs. value added.
For more analysis by Ryan Lundquist (from 2016) of what I often see, click here The image above is from Ryan’s article.
My comments: I have had many discussions with real estate agents and home owners about this issue. The number of bedrooms in a house can be a significant factor in many markets. In my market most homes were built prior to 1940 and have modifications, such as additions, over time. The pass through bedrooms can seldom be fixed. I usually call them “dens”.
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To read more of this long blog post with many topics, click Read More Below!!
NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, appraisal business, adjustments mortgage origination stats, etc.
The Effect of COVID-19 on Appraisal Volume
Nov. 9, 2020
by Danny Wiley, Senior Director of Valuation for Single-Family Credit Risk Management at Freddie Mac
Excerpts: There’s been widespread speculation about the specific effects of the COVID-19 pandemic on appraisal volume. Has it been greatly affected? Are the temporary appraisal flexibilities being used? What about waivers and their impact? But the good news is that there’s no need to speculate about these questions because there’s available data to answer them. And I’d like to share the insights we’ve gotten here at Freddie Mac by analyzing that data.
… A closer look shows that distinct appraisals submitted to UCDP have increased 53% between 2014 and 2019 (about 9% per year). Moreover, when looking at appraisal report submissions from January to September of this year, the numbers show a 40% increase in appraisal volume over the same time period in 2019.
Over the last six months, we’ve gotten reports from our clients that they’re seeing longer appraisal turn times and higher fees. This isn’t surprising considering the data above related to increased volume and the fairly static number of active appraisers. And clients have voiced concern that it will only get worse if we rely solely on the existing appraiser resource pool without making prudent alternatives available.
Purchases Now Account For a Majority of New Mortgages
Excerpts: The initial report covers activity for March and shows that at month’s end the average 30-year conforming rate had increased by nearly 60 basis points over the course of the month to 3.34 percent. Still, this was 20 basis points below the rate at the same point in 2020. Average rates by loan product are shown.
“Recent – and sharp – upward movements in interest rates have shifted the mortgage originations landscape very quickly,” said Black Knight Secondary Marketing Technologies President Scott Happ. “The wave of refinance activity of the last year and some months has suddenly given way to a purchase-heavy mix. The implications of this shift touch nearly every area of mortgage lending, which in turn has implications for the wider economy.”
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Editor comments: For many decades, residential appraising has been considered “inferior” to commercial appraising. Appraisal textbooks focus on commercial appraisal topics and examples. I started appraising in 1975 doing residential appraising. After a few years I had the opportunity to “move up” to commercial appraising. Residential trained me to see “beyond the numbers” and look at buyer motivations, etc. When I started my business in 1986 I did lender residential mostly plus some commercial. There were few appraisers left because of the high interest rates previously over 15%. Some lender staff appraisers got bank teller jobs.
I have always seen residential appraisers as specialists in one type of property: 1-4 units. Most commercial appraisers, such as myself, appraise a wide range of different property types. Some specialize in property types such as hotels, golf courses, etc. but most do not.
Excerpt from article: There is no doubt that moving to obtaining a certified general appraisal license opens doors to varied and interesting work. If it is in one’s capacity to obtain this level, and there is the desire to spread one’s wings to a multi-discipline practice outside of the residential side, it is a great idea.
That said, the idea of being “just” a residential appraiser has got to stop. A good professional residential appraiser who studies the market, knows how to analyze and solve a problem, and can communicate effectively and succinctly, is a very valuable appraiser at that!
As professional residential appraisers, we constantly work at honing skills. We work at becoming better appraisers every day, realizing that learning never ceases if one is open to it. As professional residential appraisers, we exceed minimum qualifications and minimum education requirements.
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What Types of Appraisals Are in High Demand Due to COVID-19?
March 2021 McKissock Survey
Excerpts: “The demand for residential fee appraisers has increased with the amount of property being bought and sold in our rural area.”
“Refinance appraisals made up about 10% of my work prior to COVID, and grew to make up about 50% of my work between June 2020–January 2021.”
“By far the appraisal that we have experienced the biggest growth in demand are Residential Appraisals. More specifically, 2055 Exterior Appraisals have surged due to COVID-19 restrictions and operating around those.”
“As a services strategist at a nationwide AMC, I noticed the huge increase in requests for residential appraisals despite refinance appraisals falling off slightly because of the up-tick in rates, but the purchase transactions rebound from last year has been phenomenal already in 2021.”
“I thought Covid would sink my business, it’s been quite the opposite. I’m busier now than ever. As for the desktop products, none of the lenders I work for wanted them or would allow them.”
To read the stats and more appraiser comments, click here
10 Wild Home Inspection Photos That’ll Make You Go ‘WTF?’
Just For Fun!!
Excerpt: Every day, Brock (home inspector) posts a new photo (on instagram) from his home inspections as a warning to home buyers on what they might encounter, but also just for laughs.
“I look for the humor,” he says. “I really love when people share their own funny captions for my pictures in the comments.”
Brace yourself for the 10 most memorable scenarios Brock has ever encountered during a day’s work.
Freddie Mac Sees Rates and Prices Leveling Off Through 2022
Excerpt: Freddie Mac’s Economic and Housing Research Group finds a lot to like in the present economic environment. . The company’s quarterly forecast credits the increasing availability of COVID-19 vaccines and the easing of virus related restrictions, the passage of the American Rescue plan and its cash stimulus for households, as setting the stage for economic growth and sending consumer confidence to a post pandemic high in March. The labor market, while still needing to add 8.4 million jobs, put 916,000 on the books last month, the greatest gain since August.
All in all, the report says conditions should remain generally favorable for the housing and mortgage market through 2022, although rising rates could provide headwinds that slow housing activity. The group predicts the 30-year fixed mortgage rate will average 3.4 percent in the fourth quarter of 2021, rising to 3.8 percent in the fourth quarter of 2022.
In addition, it offers the following forecasts:
House price growth is expected to average 6.6 percent in this year then slow to 4.4 percent in 2022.
Home sales, new and existing, should reach 7.1 million in 2021, then fall to 6.7 million homes in 2022.
Purchase originations are expected to increase from 1.39 trillion in 2020 to $1.7 trillion and refinance originations to decline from $2.65 trillion to $1.8 trillion this year. They will then drop to $1.6 trillion and $770 billion, respectively in 2022. Total originations will reach $3.5 trillion this year compared to $4.04 last year, and $2.4 trillion 2022.
To read the full Freddie Mac Quarterly forecast, click here See table below.
HOW TO USE THE NUMBERS BELOW. Appraisals are ordered after the loan application. These numbers tell you the future for the next few weeks. For more information on how they are compiled, go to www.mbaa.org
Mortgage applications decreased 3.7 percent from one week earlier
WASHINGTON, D.C. (April 14, 2021) – Mortgage applications decreased 3.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 9, 2021.
The Market Composite Index, a measure of mortgage loan application volume, decreased 3.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3 percent compared with the previous week. The Refinance Index decreased 5 percent from the previous week and was 31 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 51 percent higher than the same week one year ago.
“Purchase and refinance applications declined, with most of the pullback coming earlier in the week when rates were higher. Treasury yields started last week high – close to the prior week’s level at over 1.7 percent – before decreasing 6 basis points,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Refinance activity has now decreased for nine of the past 10 weeks, as rates have gone from 2.92 percent to 3.27 percent over the same period. Last week’s index level was the lowest in over a year, as mortgage rates continue to trend higher. Many borrowers have either already refinanced at lower rates or are unwilling – or unable – to refinance at current rates.”
Added Kan, “The third straight week of declining purchase activity is a sign that rising home prices and tight supply are constraining home sales – especially in the lower price tiers. Purchase applications were still above last year’s pandemic-impacted low point, but fell behind the level of activity seen the same week in 2019.”
The refinance share of mortgage activity decreased to 59.2 percent of total applications from 60.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 3.6 percent of total applications.
The FHA share of total applications increased to 10.8 percent from 10.2 percent the week prior. The VA share of total applications decreased to 12.1 percent from 13.8 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 ($548,250 or less) decreased to 3.27 percent from 3.36 percent, with points decreasing to 0.33 from 0.43 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) decreased to 3.35 percent from 3.41 percent, with points decreasing to 0.34 from 0.41 (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 decreased to 3.24 percent from 3.36 percent, with points increasing to 0.40 from 0.36 (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 2.67 percent from 2.74 percent, with points increasing to 0.44 from 0.32 (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 decreased to 2.60 percent from 2.92 percent, with points decreasing to 0.37 from 0.46 (including the origination fee) for 80 percent LTV loans. The effective rate decreased 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.