FHFA Report: Underutilization of Appraisal Time Adjustments

Published: 1/8/2024

Excerpts: Fannie Mae, Freddie Mac, and Federal Housing Administration appraisal guidelines require such adjustments whenever market conditions have been changing. However, this blog shows that appraisers frequently do not make time adjustments, even when they are likely to impact the appraised value substantially. This analysis also finds that the adjustments appraisers do make are typically substantially smaller than house price indexes would suggest.

The main dataset used in this blog is a 5 percent sample of single-family housing in the Uniform Appraisal Dataset (UAD) that Fannie Mae and Freddie Mac (the Enterprises) collect.5 The time period covered, the third quarter of 2018 through the fourth quarter of 2021, includes all the UAD data available to FHFA when the analysis began.

…monthly house price indexes for ZIP codes are used to walk forward the comparable sales amounts. For each comparable in the data, the price indexes are used to calculate a predicted time adjustment corresponding to the age of the comparable and local price trends.

To read more, Click Here

My comments: Check out the very good graphs. Maybe the indexes were not as reliable as actual appraisal adjustments, but overall adjustments were lower by appraisers.

When I started my business in 1986, several very experienced local appraisers said don’t make time adjustments for lender appraisals. In a significant drop in prices, in the 1990s, some appraisers who made negative adjustments lost their businesses. I always made them and never had any complaints from my lender clients. I worked for an assessor’s office in the late 1970s where we were making 2% per month time adjustments upward. Since Fannie started focusing on UAD analysis around 2015, losing business because of negative market conditions has almost stopped. They are one of the easiest adjustments to make.

My market is very volatile. The only dollar adjustments on non-lender appraisals that I make on homes are market conditions unless it has a valuable feature, such as an excellent view, that needs an adjustment.


Online comments by a very experienced and savvy appraiser:

This (price indexing) is one thing that AVMs do quite well.

I’ve seen thousands of appraisals over the years where appraisers made no Positive or Negative Market Conditions adjustments, as though the market is always in balance and prices are always stable, even during periods of rapidly changing prices.

Ignoring market conditions adjustments makes us look incompetent to buyers, sellers, lenders, Realtors, and the general public. I purposely omitted AMCs from this group as they are order takers. It’s not good for Residential Fee Appraisers when FHFA tells the public how poorly we’re performing with regards to what most call “time adjustments”.


Appraisal Adjustments Yes, No, Maybe

Appraisal Business Tips 

Humor for Appraisers

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NOTE: Please scroll down to read the other topics in this long blog post on 2024 forecasts for mortgage rates and originations, Private Money lending,  unusual homes, mortgage origination stats, etc.


3.16 acre luxury compound in Pebble Beach CA for $39,000,000

Excerpts: 7 bedrooms, 8.5+ baths, 7,455 sq.ft., 3.16 Acre lot

Built in 2000 and recently renovated, the main estate and guesthouses offer a total of 7,455 square feet of living space. Highlights include a stylish dining room, a 1,000-bottle wine room, and a chef’s kitchen with an oversized island and high-end appliances. views of Carmel Bay, Point Lobos, and the grand Pacific.

Highlights include a formal dining room with a wall of glass looking into the ~1, 000 bottle temperature-controlled wine room. The main living spaces all connect to outdoor dining and seating areas around the upper fire pit and hot tub. The lower section of the yard features a beautiful putting green, bocce ball court, and two firepits with built-in seating.

To see a virtual tour and 77 photos, Click Here

My comments: Very Upscale area close to Carmel for shopping.


2024 Housing Market Predictions and Insights for Appraisers

January 8, 2024

By Kevin Hecht

Mortgage rates

The 30-year fixed mortgage rate is predicted to average 6.5–6.8% over the course of 2024, declining from the 2023 average of 6.9%. This retreat will occur as inflation falls, allowing the Federal Reserve to halt interest rate hikes. However, rates dropping substantially below 6% in 2024 is unlikely barring an economic downturn. The small rate declines expected will aid affordability to a minor degree after the surge in housing costs for buyers in 2022–2023. But far higher expenses than pre-2020 norms will remain.

Here are some key insights and recommendations for residential appraisers in 2024:

  • Be aware of the modest decrease in home prices and adjust accordingly.
  • Consider the increasing housing supply and its impact on property values.
  • Keep abreast of mortgage rate trends and affordability issues as they influence market dynamics.
  • Stay informed about the rental market trends, especially the demand for different types of rental units …

To read lots more, Click Here

My comments: This is the best list of tips about changing markets for residential appraisers I have ever read. Worth reading. Written by an appraiser, for appraisers, who also teaches economics.


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Private money lending – no AMCs, UAD, computer “reviews”, low fees, etc

Many appraisers don’t want to do non-lender work such as divorces. It can be

challenging to get started, and you may have to testify in court. There is another lender option – private money lenders. I know only a few

appraisers who work for them.

Private money lenders are the lenders who can close deals in a few days

and count on the real estate equity as collateral. They depend on an accurate

value. The property and/or borrower cannot get a conventional loan.

They have always been available, mostly for short-term financing and

borrowers with poor credit or no credit history. They are risky for the lender and its investors. For borrowers, rates and fees are high because of the risk.

Marketing to private money lenders

Remember the old mortgage broker days of visiting an office and chatting

with loan officers? You can do this for private money lenders, too.

Many referrals come from real estate agents. For example, to close their

“deal” the borrower needs a bridge loan.

You can also try sending letters or brochures, but in person is always best.

You will need to know about what they do and explain how you do appraisals

for their specific needs.


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2024 Forecasts – Rates and Origination Volume

Bankrate: Mortgage rates to gradually decline in 2024

Mortgage rates will spend the bulk of the year in the 6s, with movement below 6 percent confined to the back half of the year.

Forecasts for average 30-year mortgage rate by the end of 2024

  • Fannie – 6.5
  • Bright MLS – 6.1
  • Bankrate – 5.78

Sources: December outlooks from Mortgage Bankers Association and Fannie Mae, annual forecasts from Bankrate and Bright MLS

To read more, Click Here


MBA Forecast: Mortgage Originations to Increase 19% to $1.95 Trillion in 2024

To read more, Click Here


Fannie Mae: Home Sales, Mortgage Originations Likely to Begin Slow Recovery in 2024

Excerpt: Single-family home sales likely bottomed out in Q4 2023 and, due to the recent pullback in mortgage rates, are expected to begin a slow but meaningful recovery over the course of the next year, alongside upward-trending mortgage origination activity, according to the December 2023 commentary from the Fannie Mae

To read more, Click Here

My comment: Use these to make your own forecasts (maybe)!


House Hacking’: A Growing Trend Among Younger Homeowners

Excerpts: According to a new report from Zillow, more than half of all homebuyers are considering renting out all or a portion of their home in an act called “house hacking” in order to produce additional income.

Diving a little bit deeper, the Zillow survey showed that most Millennials (55%) and Gen Z (51%) homeowners find it very or extremely important to have the opportunity to rent out part of their home or amenities for extra income while living in it. These numbers are in comparison to 39% of all homebuyers, which is up eight percentage points over the last two years.

To read more , Click Here

My comments: Very interesting! Of course, in the recent past, they probably had roommates in college. And Airbnb is a good option now. Does renting rooms affect an appraisal? I worked in a college town for 4 years with lots of student rentals. It is a very different market as parents often purchased them and got income.


Custom home on 8.86 acres in Chappaqua, NY $1,900,000

7 bedrooms, 6 baths, 2 ½ baths, 6,814 sq.ft., 8.86 Acres

Commissioned by the Mechner family in 1969, architect John Koster worked closely with present owners to develop a property like no other. Sited on 8.86 wooded acres with vintage log cabin and sculptural stone outcroppings. An architectural smooth curved arc ceiling.

Vintage log cabin, indoor pool with domed ceiling, large windows with views. It’s a very private location – heavily wooded.

To read more and see 34 photos, click here 

My comments: From the famous Zillow Gone Wild homes, of course! It probably needs the kitchen and bath updated. No photos of them, usually indicating the home needs updating.


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, Click Here.

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 go to www.appraisaltoday.com/order Or call 510-865-8041, MTW, 7 AM to noon, Pacific time.

My comments: Rates are going up and down. Many appraisers are not busy. Some are busy, usually with non-lender appraisals.

Mortgage applications increased 9.9 percent from one week earlier

WASHINGTON, D.C. (January 10, 2024) — Mortgage applications increased 9.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 5, 2024. The results include an adjustment to account for the New Year’s holiday.

The Market Composite Index, a measure of mortgage loan application volume, increased 9.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 45 percent compared with the previous week. The holiday adjusted Refinance Index increased 19 percent from the previous week and was 30 percent higher than the same week one year ago. The unadjusted Refinance Index increased 53 percent from the previous week and was 17 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index increased 40 percent compared with the previous week and was 16 percent lower than the same week one year ago.

“Despite an uptick in mortgage rates to start 2024, applications increased after adjusting for the holiday,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The increase in purchase and refinance applications for both conventional and government loans is promising to start the year but was likely due to some catch-up in activity after the holiday season and year-end rate declines. Mortgage rates and applications have been volatile in recent weeks and overall activity remains low.”

The refinance share of mortgage activity increased to 38.3 percent of total applications from 36.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.4 percent of total applications.

The FHA share of total applications decreased to 14.4 percent from 14.5 percent the week prior. The VA share of total applications increased to 16.3 percent from 14.6 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 ($726,200 or less) increased to 6.81 percent from 6.76 percent, with points remaining unchanged at 0.61 (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 $726,200) increased to 6.98 percent from 6.86 percent, with points increasing to 0.43 from 0.41 (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 6.56 percent from 6.51 percent, with points decreasing to 0.84 from 0.86 (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 6.41 percent from 6.26 percent, with points decreasing to 0.55 from 0.73 (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 6.17 percent from 5.71 percent, with points decreasing to 0.56 from 0.59 (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

1826 Clement Ave. Suite 203 Alameda, CA 94501

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