Newz: Surplus vs. Excess Land, Interest Rate Drop? GSE Oversight?
May 2, 2025
What’s in This Newsletter (In Order, Scroll Down)
- LIA ad: Am I Still on the ‘Do Not Use’ List?
- Surplus Land vs. Excess Land: What Appraisers Needs to Know
- 5 Mind-Boggling Optical Illusion Houses That Have To Be Seen To Be Believed
- Fed officials offer differing signals on timing of potential interest rate cuts
- Fed seen cutting policy rate by a full percentage point this year
- The Balancing Act: How Appraisers Can Navigate Supply Shortages, Interest Rates, and Tariffs
- A Cry from the Appraisal Trenches: The Fall of GSE Oversight
- Mortgage applications decreased 4.2 percent from one week earlier
Surplus vs. Excess Land for Appraisals
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Surplus Land vs. Excess Land: What Appraisers Needs to Know
By Kevin Hecht
Excerpts: Land valuation is a fundamental aspect of real estate appraisal, influencing property transactions, development decisions, and investment strategies. A key part of the process involves distinguishing between the land that supports the property’s current use and any additional land that may—or may not—have independent value.
Commonly, a square footage adjustment is made based on lot size differences among comparable properties without one key distinction – whether the difference in land is surplus or excess land. This fails to consider whether the extra land has value independent of the subject property.
Surplus land and excess land are often confused. Surplus land is land which adds no value independently of the property being appraised. Excess land, on the other hand, has value because it can be divided and sold separately. These distinct differences must be accounted for in an appraisal.
Here we will discuss what constitute excess and surplus land, common methods used to identify each, and why it matters….
Methods for Identifying Surplus vs. Excess Land
Residential appraisers commonly make a dollar per square foot adjustment for differences in lot size among comparable properties without distinguishing whether the land is surplus or excess. The problem with this approach is that it fails to consider highest and best use where excess land—land that can be independently sold or valued—creates a premium.
This question cannot be answered without evaluating zoning and legal restrictions of the property.
For example, just because a property is large enough to support a second structure, zoning may prohibit multiple residences on a single lot or there may be legal restrictions in terms of land coverage and minimum square footage requirements. If this were the case, it would be considered surplus land.
When determining if land is excess land, appraisers must consider legal permissibility, physical possibility, financial feasibility, and profitability.
To read more, Click Here
My comments: Read this blog post. Residential appraisers can easily make a mistake on this topic and get into trouble.
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5 Mind-Boggling Optical Illusion Houses That Have To Be Seen To Be Believed
Excerpts: Photo above info:
2. 8198 Uphill Rd, Joshua Tree, CA
Price: $17,950,000
The Invisible House: This mirrored mansion is the brainchild of film producer Chris Hanley and Frank Gehry collaborator Tomas Osinski, who designed the home to seemingly vanish into its desert surroundings.
At first glance, you might not notice the 5,470-square-foot residence staring back at you. Nestled on 67.5 acres, the shimmering structure was created with the intent of connecting its residents with the desert through the mirrored glass exterior. The three-bedroom estate’s interior is just as astonishing featuring retractable glass walls; a 100-foot, heated indoor swimming pool; and a 224-square-foot, white wall designed for movie screenings.
Whether you are looking for a home that quite literally disappears into the Arizona desert or one that mirrors its landscape in the Hamptons, these works of jaw-dropping art not only offer a captivating design but a remarkable setting.
From California to New York, we found five optical illusion abodes that will leave you wondering if they are playing tricks on your eyes.
To read more, Click Here
My comments: Click on the addresses for the listing. I have written about some of these before. I am fascinated by these types of homes. Now you can see 5 of them in one link. My favorite is the home in the photo above.
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Fed officials offer differing signals on timing of potential interest rate cuts
A June rate cut remains a possibility 4-25-25
Excerpts: Federal Reserve officials offered differing takes this week on when the central bank might move to cut the benchmark federal funds rate from its current range of 4.25% to 4.5%.
Beth Hammack, the president and CEO of the Federal Reserve Bank of Cleveland who serves as an alternate member of the Federal Open Market Committee (FOMC) that sets U.S. monetary policy, said during a CNBC interview this week that she’s doubtful the Fed will make any interest rate changes at its May 7 meeting. She did, however, signal that a June rate move is a possibility.
“You’ve seen that this is not a Fed that is afraid of moving quickly if we need to move quickly,” Hammack said. “If we have clear and convincing data by June, then I think you’ll see the committee move if we know which way is the right way to move at that point in time,” Hammack said.
To read more, Click Here
My comments: We all hope lower mortgage rates are coming. When they hit, appraisers will final have lots of appraisals to do! This article is dated 4-25-24.
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ANOTHER OPINION ON RATES
Fed seen cutting policy rate by a full percentage point this year
April 30, 2025
Excerpts: April 30 (Reuters) – Federal Reserve policymakers won’t take much signal from a decline in first-quarter U.S. GDP, but by June clearer signs of a faltering economy will move central bankers to resume cutting interest rates, ultimately by a full percentage point by the end of the year, traders bet on Wednesday.
The U.S. economy contracted by an annualized 0.3% last quarter, the Commerce Department’s Bureau of Economic Analysis said on Wednesday, as American businesses rushed to buy imported goods ahead of President Donald Trump’s barrage of tariffs. Consumer spending downshifted to a 1.8% pace from a 4% pace last quarter.
Futures contracts that settle to the Fed’s policy rate continued to point to a start to Fed rate cuts in June, with a total of four quarter-point reductions likely, bringing the rate to the 3.25%-3.5% range by year-end.
To read more, Click Here
My comments: Google Fed rate cuts and look for the most recent opinions.
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New in the May 2025 issue of Appraisal Today:
- Review of Appraiser’s Guide to the New URAR Class
- Train the Trainer Class for GSEs New URAR and UAD 3.6, by Dave Towne
- Residential appraisal forms from the 1960s to today
- Appraisal Forms Software in September, 1993
This newsletter issue focuses on the past, present and future of residential appraisal forms to reports.
I am really glad I took the class on April 10. Before I took the class there was so much information about it that I was confused. Now I understand the “big picture” of how the fields, comments, and much more has changed.
Train the Trainer for the New URAR has some good comments. Dave Towne took the class last September and was one of the first appraisers to see what the future looks like.
Forms since the 1960s discusses the start of forms and where we are now.
Forms software since September, 1993 shows the dramatic changes since the early days of forms software.
To read the full article, plus 3+ years of previous issues, subscribe to the paid Appraisal Today go to www.appraisaltoday.com/order .
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The Balancing Act: How Appraisers Can Navigate Supply Shortages, Interest Rates, and Tariffs
By Kevin Hecht, appraiser and economist
April 29, 2025
Excerpts:
Mortgage Rates: The Dominant Market Driver
Interest rates continue to be the most important driver. As of mid-April, the 30-year fixed mortgage rate averaged 6.86% (Mortgage News Daily, April 2025). Weekly rates reported by Freddie Mac stood at 6.62% for the week ending April 10—the lowest level since mid-December 2024.
While some forecasts suggest moderate easing later in 2025 (Mortgage Bankers Association, 2025), today’s rates are still high enough to dampen affordability and constrain both buyers and sellers.
What Appraisers Should Watch
As the market evolves this spring and summer, appraisers should monitor these critical dynamics:
- Inventory levels: Rising, but still modest compared to historical norms.
- Mortgage rates: Stabilized but persistently high.
- Tariffs: Increasing construction and renovation costs.
- Home prices: Slowing nationally, with declines emerging in select metro areas.
- Buyer behavior: Shifting toward caution, with greater negotiation and longer days on market.
- Understanding these nuanced trends will be essential for producing credible and defensible appraisals. The housing market is neither crashing nor booming—it is recalibrating. Appraisers who stay informed and adapt will be best positioned for success.
To read more, Click Here
My comments: Worth reading the full blog post – not very long. I read lots of articles about these topics from other authors. This is the only one that focuses on appraisals.
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A Cry from the Appraisal Trenches: The Fall of GSE Oversight
Excerpts: Picture this: a system built to protect homeowners, backed by taxpayer dollars, now teetering on the edge of betrayal. The regulatory framework governing Government-Sponsored Enterprises (GSEs) was once a fortress of consumer protection, transparency, and fairness.
As an appraiser, I’ve watched this fortress crumble. The rules imposed on GSEs and their partners—our trade-off for their congressional charter—have been chipped away through years of cunning maneuvers by trade groups and stakeholder interests.
What’s left is a hollow shell, far removed from the original vision that fueled our work. The result? A housing market teetering on the brink, with appraisers like me caught in the crossfire.
Here’s where it gets wild. The CFPB’s potential collapse could be a game-changer for us. If it goes down, so does its Regulation Z safe harbor that let AMCs lowball our fees. Without it, AMCs and lenders could face $10,000 to $20,000 fines per appraisal for dodging market-rate pay.
A federal injunction has stalled the CFPB’s demise, but if it falls, the AMC model could implode—or lenders might finally have to foot the bill instead of bleeding us dry through fee splits. That could bring our best and brightest back to GSE lending, leveling the playing field with fairer work distribution.
A Battle Plan to Save the System
To read more, Click Here
My comments: Worth reading the full blog post. Over 70 comments. Many are worth reading.
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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: We are all waiting for mortgage rates to drop in 2025.
Mortgage applications decreased 4.2 percent from one week earlier
WASHINGTON, D.C. (April 30, 2025) — Mortgage applications decreased 4.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 25, 2025.
The Market Composite Index, a measure of mortgage loan application volume, decreased 4.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4 percent compared with the previous week. The Refinance Index decreased 4 percent from the previous week and was 42 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 3 percent compared with the previous week and was 3 percent higher than the same week one year ago.
“Mortgage rates were little changed last week with the 30-year fixed rate at 6.89 percent. Mortgage application activity, particularly for home purchases, continues to be subdued by broader economic uncertainty and signs of labor market weakness, dropping to the slowest pace since February,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Even with the spring homebuying season underway, purchase applications decreased, as conventional and VA applications saw declines of 6 percent and 4 percent, respectively. With slowly-increasing housing inventory in many markets and first-time homebuyers still in the mix, FHA purchase applications fared better with only a slight decline. Overall purchase applications continue to run ahead of last year’s pace.”
Added Kan, “Refinance activity dipped again, as mortgage rates remained close to 7 percent, and borrowers hold out for a bigger decline in rates. Given the pullback in refinancing, the average loan size for refinances declined to just under $290,000, the lowest level in three months.”
The refinance share of mortgage activity remained unchanged at 37.3 percent of total applications from the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 7.4 percent of total applications.
The FHA share of total applications remained unchanged at 16.7 percent from the week prior. The VA share of total applications decreased to 13.1 percent from 13.4 percent the week prior. The USDA share of total applications increased to 0.6 percent from 0.4 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.89 percent from 6.90 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 decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $806,500) decreased to 6.88 percent from 6.90 percent, with points increasing to 0.60 from 0.45 (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 6.61 percent from 6.56 percent, with points increasing to 0.86 from 0.82 (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 decreased to 6.17 percent from 6.20 percent, with points increasing to 0.76 from 0.58 (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 decreased to 5.89 percent from 6.01 percent, with points increasing to 0.63 from 0.48 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The survey covers U.S. closed-end residential mortgage applications originated through retail and consumer direct channels. The survey has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, thrifts, and credit unions. 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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