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Does A “Crazy” Neighbor Lower Value?
Does A “Crazy” Neighbor Lower Value?
By Jamie Owen
Excerpts: It’s tax appeal season, and I’ve had several homeowners say that they feel their neighbors are negatively impacting the value of their homes for different reasons. Is that the case? Can that be the case?
The homeowners of one property stated that their neighbors are a nuisance. My clients said that one of their neighbors has people coming and going until late in the evening, most evenings. They also complained about there being noisy. Additionally, they claimed that the neighbor directly behind them is not a very nice person and is always causing neighborhood trouble.
Meanwhile, in a different neighborhood, a different homeowner claimed that their home was suffering a loss of value due to their neighbor’s home not being kept up and needing repairs and updates on the exterior. The neighbor’s property is an eye-sore.
The long-winded point I am trying to make is that the appraiser will need to find some evidence to support the claims that a neighboring property is really creating a loss in market value to its neighboring properties.
To read more, and see some fun animated gifs and videos, click here
My comments: As always, Jamie often writes about appraisal topics from a different “angle”! I have a crazy next-door neighbor also, who waits for me to come home to “attack” me with some perceived problem… since 1986 when I purchased the property.
Excerpts: A mirrored modern building, the vanishing dwelling blends in seamlessly with its desert surroundings. The shimmering surface reflects the land’s natural beauty and renders it a part of the landscape.
Its photogenic appearance is no accident. Designed by the Los Angeles-based film producer Chris Hanley, and the architect Tomas Osinski, the three-bedroom, four-bathroom property features an elongated, minimalist design spanning 5,500 square feet. A separate prefab house on wheels serves as guest quarters.
Sliding walls open up from all four bedrooms for uninterrupted desert views. The main suite includes a freestanding tub in the bedroom and a glass bed.
Set on 90 acres, this is the largest privately owned parcel of land that abuts Joshua Tree National Park, according to the property’s website. It is also just 10 minutes from the shops, hotels, and restaurants of downtown Joshua Tree and a two-hour drive from Los Angeles.
My comment: Only $3,560 per night to rent. This is near the top of my to-do list when I win the lottery (or can accurately forecast the next housing price downturn)! Also, it is close to shopping and restaurants.
Excerpt: The share of appraisal waivers for both GSEs combined for February 2022 stood at 30%, down 19 ppts. from its series’ peak in March 2021. This decline is largely due to a share shift away from refinance loans, for which waiver usage is more prevalent. There is also a decline in waiver usage by product type.
• The share of Cash Out and No Cash Out refis declined 9 ppts and 10 ppts . respectively from their series’ high in October, while purchase waivers declined 4 ppts . from its series’ share high in November.
• Waivers are granted using a data based analysis of the reasonableness of the applicant’s self valuation. The data measure whether an appraisal waiver was used, not only granted, on the loan.
To download the full report, with lots of details and graphs, click here
My comment: Ed Pinto, AEI Housing Center, publishes this report regularly. Waivers are dropping. Fortunately, for appraisers, the GSEs decided not to continue working on “Data and Done” (Get Property Data Report. If okay, make the loan with no appraisal needed.) They are now doing Desktops and still testing Hybrids. The GSEs keep saying they want to continue to use human appraisers.
In the May issue of Appraisal Today, Available May 2, 2022
Excerpt: Desktop orders – how to checkout an AMC or lender, whether a regular client or prospect, before accepting the appraisal.
Regular clients are best, of course, as they are on your approved appraiser list. See Page 7 for a list of 7 vendors, with details and links. I interviewed them for more details.
Question 1. Which of the requirements do you have now?
• Recent appraisal you did on the home, with a sketch, photos, etc.?
• What data sources do you consider reliable, such as public records?
• MLS that you trust for all photos, descriptions, and a floor plan?
• Geographic competency
Question 2. If you don’t have reliable sources, ask these questions before accepting the order. Can they provide what you must have? If not, Say No to the Desktop
• A low fee and the client requires you to get much, or all, of the information yourself.
• Photos – front, rear, street scene. Interior of main living area, kitchen, and all baths.
• Floor plan with exterior measurements and square footage calculations (Can be on different drawings).
• The data (and or photos) you need to fill in Page 1 subject property description., including any repairs needed, defects, etc. Plus Q and C ratings on the grid.
• Does the client have this information from a reliable Property Data Collector (PDC) or other sources, such as many photos and videos? Requirements vary for PDCs. If not, who is getting the photos, data, etc. you need?
• You checked information on the data provider, and their data collectors have no background in real estate or any type of home inspection. They have limited training.
Note: PDCs are not required for Desktops, only for Hybrids.
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Excerpts: Do you feel that? It’s change. The housing market is still elevated, but there’s no mistaking a different temperature – especially over the past week.
An elevated market with a shift in demand: We’re not back to normal levels for inventory, the number of multiple offers, and basically every metric. This means the market is still elevated. In other words, it still feels like the market is on steroids on some level. Yet, there’s no mistaking a rise in uncertainty as affordability has taken a beating lately.
Hot pockets: The housing market is like a hot pocket taken out of the microwave a tad too early. Some portions are blazing hot while others are only warm. What I mean is not all neighborhoods and price ranges have the same temperature. I first shared this analogy in 2016. And now it’s back.
Number of offers chopped in half: I’ve been hearing from agents that the number of offers being chopped in half. So, instead of getting 8-10 offers, it’s more like 3 (sometimes way more). The percentage of multiple offers among sales in April so far is about 71.5%. This number should be closer to 50% in a normal year, so we still have an elevated market. But pending contracts over the past week show 62.7% had multiple offers, which tells us the temperature is changing.
To read more and see very helpful graphs (ideas for your the analysis of your market, click here
My comments: No One Ever Knows when the market peaks! But you can try to keep track of when it starts going down. I have been through many ups and downs in 45 years of appraising in Northern California. In the late 70s, prices were going up 2% per month in the non-urban area where I worked. In the early 1980s, mortgage interest rates went up as high as 18%. Lender appraisers were laid off. In 1986, with much lower rates, there was a refi boom but an appraiser shortage. It dropped here in the 90s with the dot-com bust. Where I work now, for the past 40 years, in the San Francisco Bay Area, I have seen prices drop as much as 80% in 2008 in lower-priced neighborhoods. It dropped about 30-40% in my city, the median for the Bay Area. There were some signs, such as a slowing market with some price declines before 2008. No one ever predicted a housing frenzy during a pandemic! It did not happen during the 1918 Pandemic, our only comp.
My comments: Worth reading. Has some details on why prices are declining. Maybe you will get some ideas for your area.
How I see what is happening today in any market. Takes just a few minutes. Catch the down market as soon as you can. Don’t get into trouble with buy-backs on foreclosures when you failed to detect declining markets.
I have always looked at changes in listings, pendings, price changes, days on the market, number of offers, expireds, off markets, removed and re-listed, etc. This data is from today and the future. Sales are the past. Select and sort by type to tell you immediately what is happing. For example: lots of pendings and few listings = hot market. Few sales and lots of listings, expireds, etc. = not a good market. I do it in market segments, such as condos only, price ranges, different areas, etc.
Excerpts: The unconventional design, built as a weekend home for the Woods family, has plenty of space, at 3,310 square feet, with four bedrooms and 4.5 bathrooms.
The home features bold horizontal lines, natural materials, and indoor-outdoor flow. Earth-toned plaster and textured concrete masonry blocks anchor each end of the home. The remaining facade is wrapped in eye-catching brass panels that meld with the surroundings. Best of all, floor-to-ceiling windows frame views in all directions.
Adding more natural light from within, a glass-enclosed bridge connecting the two wings of the home creates a central atrium that can be viewed from most of the rooms.
My comment: I love the floor-to-ceiling windows and the privacy. I like looking at geologic features. Deserts are great as there are no trees to block the view. In my last semester of college, I took a geology class. It was too late to change my major or I may have become a geologist instead of a biologist! I know of two geologists who became appraisers. One is Lyle Radke from Fannie Mae. I don’t know of any former biologists.
Chat Online About Real Estate Appraisal Crazy Fun Stories on May 5 at 2 PM Pacific time on Clubhouse
We all have them! Bring yours. Scary, funny, weird, etc.
Meet live with other appraisers on Clubhouse (audio-only social media) in the Real Estate Appraisal Questions group. Every week on Thursday at 2 PM Pacific Time. Download the clubhouse app (Apple and Android). Signup is very easy. Search for the name of the group or real estate appraisal.
Julie Friess and I started it a few months ago. Participants discuss appraisal topics, sometimes with differing opinions, of course ;> It’s like having a conversation sitting down with appraisers at a conference. When appraisers get together, there is never a lack of what to talk about!
All meetings are recorded and available soon after they are completed. You can listen to them any time.
Changing markets…. what are our responsibilities? Sales are the past. The present and the future are listings, pendings, listings, DOM, etc.
Desktops, confusion, ANSI dragging you down?
What’s the future of appraising, and how’s YOUR market doing?
Excess land and surplus land. We also discussed easements, landlocked parcels, zoning, water access, and many other topics.
Septic systems, sewer, or neither one? Do you know? One of the most frequent reasons for E&O complaints.
AMC revision requests & ROV? Is scope creep getting you down?
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
My comments: Rates are going up. Appraisal demand decreases are from refis. Make money while you can!
Mortgage applications decreased 8.3 percent from one week earlier
Mortgage applications decreased 8.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 22, 2022.
The Market Composite Index, a measure of mortgage loan application volume, decreased 8.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 7 percent compared with the previous week. The Refinance Index decreased 9 percent from the previous week and was 71 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 8 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 17 percent lower than the same week one year ago.
“With mortgage rates increasing last week to the highest level since 2009, applications continued to decline. Overall application activity fell to the lowest level since 2018, with both purchase and refinance applications posting declines. Refinance applications were 70 percent below the same week a year ago, when the 30-year fixed rate was in the 3-percent range,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The drop in purchase applications was evident across all loan types. Prospective homebuyers have pulled back this spring, as they continue to face limited options of homes for sale along with higher costs from increasing mortgage rates and prices. The recent decrease in purchase applications is an indication of potential weakness in home sales in the coming months.”
Added Kan, “In a period of high home-price growth and rapidly increasing mortgage rates, borrowers continued to mitigate higher monthly payments by applying for ARM loans. The ARM share of applications last week was over 9 percent by loan count and 17 percent based on dollar volume. At 9 percent, the ARM share was double what it was three months ago, which also coincides with the 1.5 percentage point increase in the 30-year fixed rate.”
The refinance share of mortgage activity decreased to 35.0 percent of total applications from 35.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 9.3 percent of total applications.
The FHA share of total applications increased to 10.6 percent from 9.9 percent the week prior. The VA share of total applications increased to 10.2 percent from 10.1 percent the week prior. The USDA share of total applications remained unchanged at 0.5 percent from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.37 percent from 5.20 percent, with points increasing to 0.67 from 0.66 (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 $647,200) increased to 4.89 percent from 4.76 percent, with points increasing to 0.47 from 0.46 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 5.29 percent from 5.11 percent, with points decreasing to 0.88 from 0.90 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 4.68 percent from 4.44 percent, with points increasing to 0.80 from 0.77 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 5/1 ARMs increased to 4.28 percent from 4.09 percent, with points increasing to 0.74 from 0.56 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.