Newz: AI Limits, VA News, New UAD,
Hurricane Risks
October, 11 2024
What’s in This Newsletter (In Order, Scroll Down)
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Intended Use and User (LIA Ad)
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The Limits of AI: When the intelligence is artificial, common sense is a superpower
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Vila Siena In Bel-Air CA Is The Most Insane Mega-Mansion EVER at $177,000,000
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The New UAD: Opportunity, Confusion or Threat?
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What’s New at the VA? A Q&A With Its Chief Appraiser
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Effects of Hurricane Helene
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Is Anywhere Safe From Hurricanes? The 10 States With the Lowest Risk of Damage
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Appraisal Business Tips
- Humor for Appraisers
- Click here to subscribe to our FREE weekly appraiser email newsletter and get the latest appraisal news!!
The Limits of AI: When the intelligence is artificial, common sense is a superpower
By John Russell
Excerpts: At some point, all of us will integrate AI tools into our business practices. Whether it automates mundane and repetitive tasks, generates narrative text, or assists with analyses, the power of AI to save time is real.
The good news for valuation professionals is they have lots of experience spotting data points that don’t jibe with what they know. Another way to say this is that they have common sense. It’s a basic requirement for doing the work. Of course this 3-story overbuilt McMansion is probably not a comparable for a Cape Cod two miles away. That sale was under atypical conditions and, at minimum, needs adjustments to even be considered. You get the idea.
Do I trust what the AI is telling me?
Accepting AI outputs without any skepticism is a recipe for disaster. Approach AI like a detective interviewing witnesses: trust, but verify. Basic internet searches can quickly fact-check results — or raise enough red flags that you reject what is being offered. No state board will accept the argument, “But ChatGPT said,” and neither should you….
Should I be using AI for this task?
Just because you can doesn’t mean you should — commit this phrase to memory. You will have to own everything in your report, and if too much of the product is driven by AI tools, you may be asked: “Well, what exactly did you do here?”…
Common sense is a superpower that can protect you from dire consequences as you experiment with AI. It’s tempting to be spellbound by new AI tools that seem miraculous — and to let down your guard of common sense. Instead, I recommend a heightened sense of caution: The tools are only as good as the people who craft them and the inputs provided by the users. AI hallucinations are still unpredictable, inevitable failure points, which means any “facts” and analyses it supplies should always be verified — it’s just common sense
To read more, Click Here
My comments: Good, practical analysis of AI for appraisers.
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Vila Siena In Bel-Air CA Is The Most Insane Mega-Mansion EVER at $177,000,000
Excerpts: 8 bedrooms, 24 baths, approx. 35,000 sq.ft.
OF all of the mega mansion we’ve ever seen this is probably one of the coolest most insane ones????
Probably the coolest thing is that the Bel-Air California home has a primary suite with a retractable roof (never knew that was an option?) along with an outdoor sauna pod, screening room, auto gallery, reflecting pool, 30 foot pivot doors, wine room with 200 year old antique Moroccan doors, and a lot more.
The mansion is sheathed in teak and stone. Inside, a four-story, bronze floating staircase hangs from the ceiling over a reflecting pool. Thirty-foot pivot doors are big enough to usher in Goliath.
To read more and see photos and video, Click Here
My comments: Info is from Zillow Gone Wild and a few other sources.
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The New UAD: Opportunity, Confusion or Threat?
By George Dell, MAI, SRA
This UAD topic is intertwined with the new integrated URAR by our GSEs (Government Sponsored Enterprises) – as both the UAD and URAR will arrive on the scene together.
My creative brain kept following logical outcomes, and kept coming to “unintended consequences!” Each thought led to another thought. What if? What about? And Oh no!
The threat heard from appraisers is that this is yet another move by the GSEs to eliminate them. “If we just make the appraisers (and non-appraisers) data-gatherers, we can do the analysis in house.”
Everything is quantified. A long list of ‘subjective’ words are banned. Descriptive narrative is difficult. Inherent human bias can become embedded and righteous.
This “objective quantified” data approach does make standardized analysis easier. The “quants” win. The problem is that it can make subjective uncertainty opinion a hard number.
An example: If property condition is scored, say, 1 to 5 . . . A “3” in the past would have been “average” condition. Here’s the problem. A data collector may be out in the field, in a neighborhood of ‘nice’ homes, mostly in good to very good condition. (Which is ‘average’ for this nice neighborhood.) This demonstrates the issue of uncertainty and “relative reference.”
Some negative outcomes may include:
Limitation of investigative property inspection, work scope, anomalies, and interaction with the lender client when unique situations arise. An example comes to mind – moving a hatbox on an upper closet shelf reveals a ¼” crack, leading to discovering a cracked slab.
To read more, Click Here
My comments: Worth reading. George Dell has been a keen observer of this topic, and other appraiser topics, for a long time.
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How to use less gasoline and save money today!
In the September, 2024 issue of Appraisal Today
Summary of ways to decrease your fuel consumption
• First step: (and most important) step: Start recording your gas mileage. Easiest way? Use your trip odometer. Calculate to check your your Miles per Gallon (MPG).
• Second step: Do you drive aggressively and not know it?
• Third step: How long are you sitting still at red lights?
• Fourth step: Keeping moving in traffic congestion.
• Fifth step: Slowly accelerate after stops.
• Sixth step: Your cruise control saves gas (but not by using it the way you might think).
Lower speeds
You can get substantial savings on a long trip, up to 14 percent savings with
average savings of 12 percent per Edmunds. No one recommended driving
significantly under the speed limit for safety reasons.
Cruise control
Result: Surprisingly effective way to save gas. Up to 14-percent savings,
average savings of 7 percent per Edmunds. In the Edmunds test using a Land
Rover LR3 and a Ford Mustang, the Land Rover got almost 14 percent better
mileage using cruise control set at 70 miles per hour rather than cruising at
driver-controlled speeds between 65 and 75 miles per hour. The Mustang got 4.5 percent better mileage.
To read more about this topic (and many more cost saving ideas), plus 2+ years of previous issues, subscribe to the paid Appraisal Today.
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If you are a paid subscriber and did not receive the October 2024 issue emailed on Tuesday, October 1, 2024, please email info@appraisaltoday.com, and we will send it to you. You can also hit the reply button. Be sure to include a comment requesting it.
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What’s New at the VA? A Q&A With Its Chief Appraiser
by Isaac Peck
Excerpts: In addition to being a favorable avenue to homeownership for eligible veterans, the VA is also known throughout the valuation community for respecting the work of appraisers. As market uncertainty and headwinds persist, Working RE reached out to James Heaslet, chief appraiser at the VA, to get his thoughts on several topics specific to the VA and the profession at large. Heaslet is a retired Marine Corps veteran and a second-generation appraiser who began his valuation career as a trainee at his father’s office in 2007.
In the following Q&A, we asked Heaslet for an update on some of VA’s programs and initiatives, including the Assisted Appraisal Processing Program (AAPP), as well as steps the VA has taken to address bias in appraisals and its role on the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE)
Question: Has VA considered a uniform measuring standard, such as ANSI (American National Standards Institute)?
Heaslet: The simple answer is “no.” However, appraisers follow established industry practices, and these are monitored by the state agencies that license appraisers.
Question: What improvements is the VA planning to its appraisal process?
Heaslet: Key enhancements to the appraisal system will include improved appraisal tracking features…
Question: What changes to MPRs is the VA considering? When might we expect a decision on those?
Heaslet: VA issued an Advance Notice of Proposed Rulemaking seeking public input on potential changes to the Minimum Property Requirements on Dec. 11, 2023. VA collected comments through Feb. 9, 2024. We’re currently reviewing and cataloging the comments to determine next steps.
Question: In what states and localities is the VA looking for more appraisers?
Heaslet: There are several counties across the nation that have been identified as “High Demand Counties” due to a shortage of available appraisers.
To read more, Click Here
For information on fees, counties where appraisers are needed and many other topics, Click Here
My comments: Appraisers who are on the VA list do not have AMC fee competitions, excessive demands and requirements, etc. VA is the only lending organization I recommend for appraisers, except for direct lenders. Unfortunately, not many lender appraisers are interested in working for VA for various reasons. Big Mistake. VA really wants to help active and retired military people.
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Effects of Hurricane Helene
Nearly One-Third of Young Adults Say Hurricane Helene Has Made Them Reconsider Where They Want to Live in the Future: Survey
October 7, 2024
Excerpts: Nearly one-third (32%) of U.S. residents aged 18-34 say they’re reconsidering where they want to move in the future after seeing or hearing about the damage caused by Hurricane Helene, according to a survey commissioned by Redfin. That compares with 15% of respondents aged 35 and older.
It’s worth noting that many people say the storm hasn’t changed their perspective on where to live; 45% of overall respondents (and 40% of respondents in the South) said the news of Hurricane Helene hasn’t impacted how they think about their housing situation.
Almost one-quarter (23%) of respondents overall expect insurance premiums in their area to increase after Hurricane Helene. The share was highest among respondents in the South (32%).
This report focuses on responses to the following question: “Which of the following apply to you after seeing/hearing about the damage caused by Hurricane Helene?” Respondents were asked to consider nine situations. Data includes age and region for the questions.
To read more, Click Here
My comments: This survey was taken before the current hurricane, Milton. I keep reading about more people who don’t want to live in Florida because of the hurricanes. The Gulf Of Mexico, west of Florida is getting hotter due to higher water temperatures, increasing hurricane size and risk.
Is Anywhere Safe From Hurricanes? The 10 States With the Lowest Risk of Damage
Excerpts: Sadly, Helene is far from the only natural disaster the U.S. has faced this year. Extreme weather has become an unfortunate but increasingly common part of life.
This year alone, major storms have done more than $25 billion in damage nationwide. Thanks to climate change, the number of floods worldwide has increased by 20% since 2000. It’s also created more intense hurricanes and increased the amount of burned acreage in the U.S. due to wildfires by 320% since 1996.
The near-constant threat of hurricanes, floods, and tornadoes has put homeowners on edge and ratcheted up home insurance premiums. In some places, such as hurricane- and flood-prone Florida, homeowners are choosing to forgo insurance altogether rather than deal with rising premiums.
Each region has particular risks. Homes across the West are vulnerable to wildfires, while homes in the Southeast see the most floods.
To make sure prospective homeowners are informed about the potential risks to their properties, Realtor.com now offers an environmental risk score for properties, assessing the risk of flood, extreme heat, wildfires, and other types of extreme weather in an area.
To read more, Click Here
To get an environmental risk score, Click Here
My comments: Environmental Risk information is becoming more common in listings. Currently hurricanes are in the news. There may be some people who will be reluctant to move to states with increasing environmental risks.
I tested the risk scores for my home. I entered my email address, hit return, and was allowed access after opening the email response. My risks were minimal except air quality (nearby freeway mostly).
My major risk is earthquakes as I live 10 miles east from a major earthquake fault and 6 miles west from another one. I have expensive, and limited, earthquake insurance. Few people here have it.
What is the affect on appraisals?
I have never seen a difference in value between a home on an earthquake fault, my primary risk. What are the risks in your area? Are values affected? Friends in nearby Bay Area cities with no known environmental risks are getting insurance cancelled at renewal. If a home has very high insurance costs, will it sell for less than a nearby home with standard insurance costs? Buyers are making offers subject to getting insurance.
Will homes in Florida, including condos, have lower values depending on their hurricane risk? What about very high home insurance rates for homes in a wooded area subject to wildfires? What if there is no home owner insurance available for a home except from a very expensive and a not very good policy?
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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 business to pick up. I predict that in early 2025 it will start increasing and keep increasing.
Mortgage applications decreased 5.1 percent from one week earlier
WASHINGTON, D.C. (October 9, 2024) — Mortgage applications decreased 5.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending October 4, 2024.
The Market Composite Index, a measure of mortgage loan application volume, decreased 5.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5 percent compared with the previous week. The Refinance Index decreased 9 percent from the previous week and was 159 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier. The unadjusted Purchase Index increased 0.1 percent compared with the previous week and was 8 percent higher than the same week one year ago.
“In the wake of stronger economic data last week, including the September jobs report, mortgage rates moved higher, with the 30-year fixed rate rising to 6.36 percent – the highest since August,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Conventional loan refinances, which tend to have larger balances than government loans and hence are more responsive for a given change in mortgage rates, fell to a greater extent over the week. Purchase application volume was little changed over the week and was 8 percent above last year’s level.”
Added Fratantoni, “As we have highlighted before, the decision to buy a home is impacted by many factors, not just the level of mortgage rates. The largest constraint for many prospective homebuyers over the past year had been the lack of inventory. Now, there are more homes available in many markets across the country, and with mortgage rates still low compared to recent history, at least some potential homebuyers are moving ahead.”
The refinance share of mortgage activity decreased to 52.4 percent of total applications from 54.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9 percent of total applications.
The FHA share of total applications decreased to 16.2 percent from 16.6 percent the week prior. The VA share of total applications increased to 16.9 percent from 15.4 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) increased to 6.36 percent from 6.14 percent, with points increasing to 0.62 from 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 $766,550) increased to 6.64 percent from 6.50 percent, with points increasing to 0.50 from 0.36 (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 6.22 percent from 6.06 percent, with points increasing to 0.85 from 0.75 (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 5.71 percent from 5.51 percent, with points increasing to 0.67 from 0.62 (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 6.06 percent from 5.87 percent, with points increasing to 0.61 from 0.55 (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.
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Ann O’Rourke, MAI, SRA, MBA
