August 30, 2024
What’s in This Newsletter (In Order, Scroll Down)
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New AMC client. They’ve asked me to provide a list of other AMCs I work with and how long I’ve been working with them before they accept me. Is this a common requirement?
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AI Appraisals: Embracing the Future Appraisal
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5 Enormous Mansions, With Wildly Different Architectural Styles—Priced at Under a Million Bucks
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Is appraisal accuracy measured by contract price?
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Redfin Reports 6 of Every 7 People With Mortgages Have an Interest Rate Below 6%
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110 Nightmarish Home Inspector Scenarios
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Mortgage applications increased 0.5 percent from one week earlier
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AI Appraisals: Embracing the Future Appraisal
By Jim Amorin
Excerpts:
Image Recognition
AI can analyze property images to identify features and property conditions, and even estimate dimensions with remarkable accuracy. This technology accelerates the inspection process, allowing appraisers to focus their expertise on more nuanced aspects of the valuation where their experience and judgement are most critical.
While some may worry about image recognition taking away from the appraisers’ skills, it is more useful to see it as a supplement to your own eyes. The visioning capabilities (image recognition) of AI can reinforce your own observations. Using the generative capabilities of a large language model such as ChatGPT coupled with the visioning tools, some of the narrative description of the property can be streamlined for the appraiser.
Enhanced Reports
Another appraiser leveraged AI tools to generate detailed market analysis reports. These reports included data visualizations and trend analysis that provided clients with a deeper understanding of the market, ultimately enhancing the appraiser’s service quality and client satisfaction.
Summary
AI is not a threat to appraisers but a powerful ally. By leveraging AI’s capabilities, appraisers can enhance their efficiency, accuracy, and overall service quality. The unique judgment, expertise, and contextual understanding that appraisers bring to their work are irreplaceable. Embracing AI as a tool will ensure that appraisers continue to play a vital role in the real estate industry, delivering unparalleled value to clients and shaping the future of real estate appraising.
To read more, Click Here
My comments: Amorin’s new book is very well written and understandable. Craig Gilbert wrote an extensive review of the book “The Generative Shift: A Thorough Examination of AI” and interviewed Amorin, in the July, 2024 issue of Appraisal Today.
I have not used AI for my appraisals but follow its use in other applications, such as medical. For example, I have had many mammograms over the years. A recent study found that an artificial intelligence system has an accuracy rate of about 90 percent, compared to an overall average of 80 percent by radiologists. “Notably, when radiologists used this tool as a second reader, their performance improved,” says Dr. Moy. “So we want to reach that sweet spot where we use both.”
A friend had dense breasts. Her mammograms never detected the small tumors scattered through both breasts before her breast removal surgery, where they found them. Bad News
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5 Enormous Mansions, With Wildly Different Architectural Styles—Priced at Under a Million Bucks
Aug 23, 2024
Excerpts: You might think every sprawling mansion comes with an equally prodigious price tag. Thankfully, that’s not the case.
Believe it or not, you can find lavishly appointed estates that won’t drain every last nickel from your bank account.
And the good news is, we’ve done most of the leg work for you. We’ve found a group of five mighty mansions on the market right now, with relatively affordable six-digit price tags. In a welcome twist, each mansion serves up a different architectural style.
PHOTO ABOVE
4. 7415 Naremore Dr, Spring, TX
Price: $890,000
Bigger in Texas: Built in 1987, this 8,476-square-foot brick beauty is nestled in the prestigious Memorial Northwest Estate neighborhood.
A two-story, marble foyer features a grand curved staircase that leads up to four en suite bedrooms. Other highlights include a gourmet kitchen, a den with a wet bar, and a first-floor primary suite that opens outside.
The manicured lot also offers a three-car garage with a circular driveway out front and a pool with rock waterfall and an outdoor kitchen in the back.
To read more about all 5 homes, Click Here
To see the listing for the house above, with 38 photos, Click Here
My comments: There are no detached livable homes where I live under $1 million. Median Bay Area price in my county is $1.3 million. Other counties are much higher. Stacked ondo prices are well under $1 million except for new condos. Many are conversions of pre-1970 apartment buildings in my city.
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Is appraisal accuracy measured by contract price?
By John Fariss
Excerpts: In recent discussions surrounding the accuracy of home appraisals, a critical flaw has emerged in the prevailing narrative: the assumption that the contract price is the correct value of a property. This misconception is not only misleading but also fundamentally flawed when examined against the definition of market value as outlined by the Federal National Mortgage Association (FNMA). Again, I ask, does contract price equal market value? Further, should contract price be the metric by which appraisal values are measured?
Two recent articles highlight the ongoing debate about appraisal accuracy. The first from HousingWire, “Half of homes sold appraised for more than the sale price,” reports that the gap between home appraisals and sale prices is rising based on a study by Corporate Settlement Solutions (CSS). The implication in the article is that a property is undervalued or overvalued if not within $2500 of the contract price. The article implies that there is difficulty in “providing accurate valuations” as evidence by the gap in appraisals and actual sale prices.
The second article from AppraisersBlogs, “Accurate Appraisal Underreporting,” debunks the notion that appraisals are frequently inaccurate if they deviate from the contract price by more than $2,500, and argues that based on median house values of $420,000 in the US, this would amount to a difference of less than 0.01% which is insignificant. Such a “definition of “accuracy” is both misleading and dangerous.” The article accurately indicates that there is always a degree of subjectivity and variability involved in appraisals.
Both articles underscore that gaps between appraised values and sale prices exist, but they fail to address the core issue: the contract price is not synonymous with market value.
To read more, Click Here
My comments: Good analysis of the issue. Maybe someone other than appraisers will read it…
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Coming in the September 2024 issue of Appraisal Today. Available Sept. 2
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How to use less gasoline and save money today!
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Disability – Your Greatest Risk
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Using the Fannie and Freddie Mac Definition of Market Value as a Sales Verification Method, By Tim Andersen, MAI
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News Flash: Clients, GSE’s and Federal Agencies Assume Appraisers Verify Their Market Data and Have Support for Their Adjustments, By Steven R. Smith, MSREA, MAI, SRA
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Redfin Reports 6 of Every 7 People With Mortgages Have an Interest Rate Below 6%
Excerpts: Nationwide, 85.7% of U.S. homeowners with mortgages have an interest rate below 6%, down from 90.6% at the start of last year and a record high of 92.8% in mid-2022.
This means even more than 85.7% of homeowners with mortgages have a rate below the current weekly average of 6.46%, prompting many to stay put instead of selling and buying another home at a higher rate—a phenomenon called the “lock-in effect.”
Redfin analyzed data from the Federal Housing Finance Agency’s National Mortgage Database as of the first quarter of 2024, the most recent period for which data is available.
Here’s the full breakdown of where today’s homeowners fall on the mortgage-rate spectrum:
- Below 6%: 85.7% of mortgaged U.S. homeowners have a rate below 6%, down from a record 92.8% in the second quarter of 2022.
- Below 5%: 76.1% have a rate below 5%, down from a record 85.6% in the first quarter of 2022.
- Below 4%: 57.4% have a rate below 4%, down from a record 65.3% in the first quarter of 2022.
- Below 3%: 22% have a rate below 3%, down from a record 24.7% in the first quarter of 2022.
It’s worth noting that for some homeowners, the pandemic surge in home values means they have enough equity to justify selling and taking on a higher rate, especially if they’re downsizing or moving somewhere more affordable. It’s also worth noting that while many homeowners remain locked into their low mortgage rates, a rising share of Americans are mortgage-free.
Mortgage rates have declined in recent weeks, causing homebuyer mortgage payments to fall for the first time since 2020. The current average weekly mortgage rate (6.46%) is the lowest in 15 months, but still significantly higher than the 2.65% record low hit during the pandemic.
With inflation on the decline, the Federal Reserve is now expected to start cutting interest rates at its next policy meeting on September 18. But the size and pace will depend on incoming economic data, particularly labor market data. Markets have now priced in aggressive expectations for how quickly the Fed will cut. If the Fed ends up cutting slower than markets anticipate, mortgage rates may rise a bit.
To read more, Click Here
My comments: I am never giving up my 3.5% rate on a non-owner occupied duplex (at that time) that I got in the past with a $1,243 monthly payment! Worth over $1 million now.
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110 Nightmarish Home Inspector Scenarios
Excerpts:
Ladder Extender Part 2
This is just a temporary solution until the 10″-thick slab is poured. Install an attic ladder as a handy way to use your rafter space in the garage.
To see 108 more scary photos, Click Here
My comments: I have seen similar DIY stuff over the years. Scary. I always report the problem in the appraisal and let the client know about it. I strongly recommend fixing it. I hope you don’t have any nightmares seeing these photos!
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Bad Egress
Nothing about this screams safety or viable emergency escape. It looks bolted to the roof and there’s a chain to help keep it in place. This is one of those scary things home inspectors find, like a beaver in the attic.
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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. THE FUTURE LOOKS GOOD FOR RATE CUTS, BUT NOT MUCH CHANGE YET.
Mortgage applications increased 0.5 percent from one week earlier
WASHINGTON, D.C. (August 28, 2024) — Mortgage applications increased 0.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 23, 2024.
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 decreased 1 percent compared with the previous week. The Refinance Index decreased 0.1 percent from the previous week and was 85 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 9 percent lower than the same week one year ago.
“Mortgage rates declined for the fourth consecutive week, with the 30-year fixed rate at 6.44 percent, the lowest since April 2023. Rates have now come down more than 80 basis points from a year ago,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Mortgage applications were slightly higher, driven by marginally stronger purchase activity. Refinance applications were essentially unchanged but are still 85 percent higher than last year as borrowers continue to act – particularly FHA and VA borrowers. As observed in recent weeks, despite lower rates, purchase applications have not moved much. Prospective homebuyers are staying patient now that rates are moving lower and for-sale inventory has started to increase.”
The refinance share of mortgage activity increased to 46.6 percent of total applications from 46.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5 percent of total applications.
The FHA share of total applications decreased to 15.3 percent from 15.6 percent the week prior. The VA share of total applications increased to 15.9 percent from 15.3 percent the week prior. The USDA share of total applications remained unchanged at 0.4 percent from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.44 percent from 6.50 percent, with points decreasing to 0.54 from 0.60 (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 $766,550) increased to 6.75 percent from 6.68 percent, with points decreasing to 0.39 from 0.56 (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 decreased to 6.36 percent from 6.42 percent, with points increasing to 0.80 from 0.78 (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 5.88 percent from 6.04 percent, with points decreasing to 0.68 from 0.71 (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 5.98 percent from 6.25 percent, with points increasing to 0.65 from 0.57 (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.
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Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501
Phone: 510-865-8041
Email: ann@appraisaltoday.com
Online: www.appraisaltoday.com
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