Appraisal News and Business Tips

Posts Tagged real estate market

8-16-18 Newz//Market starting to tank? ;Unusual Homes ;Public Trust Failed?

Bye-bye 1004MC, Hello Analysis

By Rachel Massey, SRA, AI-RRS
Excerpt: What does this mean to the residential practitioner operating in the mortgage space? It means that the requirement for analyzing the market remains, and it is now up to the practitioner to support their opinion, without the benefit of a flawed format. Appraisers can now choose how they present their analysis, which may include multiple sources to support an opinion. Fannie Mae is clear that the one-unit housing trends section should reflect properties that are directly competitive with the property being appraised. The following information relates to several different ways to support trends, but is not an exhaustive list.

Read the full article here:

My comment: FHA and VA still require 1004mc, plus some lenders and AMCs. Freddie is expected to drop the requirement.
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8-9-18 Newz//No more 1004MC?? ;Witch Windows ;North Dakota Waivers?

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Markets slowing down. Price declines??

Housing market is showing signs of cracking: ‘Anything-goes list-price strategy is no longer working
Excerpt: But the slowdown is also tied to overheated prices. Even in the hottest markets, there is a limit to affordability, and that limit is clearly now being hit.

In pricey Southern California, sales of both new and existing homes fell sharply in June compared with a year ago, according to CoreLogic. Demand is still quite strong, and while prices continue to gain, more listings are showing price reductions.

My comment: If I knew when the prices peak, I would be rich and get the Nobel Prize!! It is very tricky. Beware of price declines starting. Keep close watch on lots more listings than pendings. Few, or no, offers way over list. The bottom of the market is easy to see. Fast declines, then stabilizes for quite a while.
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The problem of overpricing in real estate

By Ryan Lundquist

 

Excerpts: Overpricing is a problem. You’d think in such a “hot” market that it wouldn’t be an issue, but it is. I’m not trying to dog sellers, but let’s talk about some of the most common pricing mistakes right now. I hope this helps.

5) Sales instead of comps: The most common pricing mistake I see is pricing according to a sale down the street that really isn’t comparable. So a seller says, “I know that house is totally remodeled with a pool, but someone’s going to pay the same amount for my house.” My advice? Price according to similar homes that are actually getting into contract rather than dissimilar properties. Be careful about hijacking price per sq ft figures too.

My comment: Written for real estate agents, but helpful for appraisers. I encountered this when doing a retrospective estate appraisal for a house that will be listed. The owner kept going on and on about a home nearby that sold for $1,100,00 that was “smaller” than hers. Fortunately, I was not doing current value ;>

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8-2-18 Newz .1004MC dropped, Treasury Proposes Appraisal Downsizing, Rural Appraisals

No more 1004MC for Fannie appraisals

Date: 7/30/18 1:46
My note: This was posted in an appraiser yahoo email discussion group I have subscribed to since it started awhile ago. The person who sent it is very reliable. I have known him personally for many years. Below is the email. When I used to travel a lot to appraisal conferences, sometimes Fannie would make comments on significant changes. This was one of those comments. When I speak I am a lot more candid than when I write for unknown reasons. Maybe Fannie speakers do the same sometimes.
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Posted discussion group message:
“I’m in Nashville at the National Appraisal Institute Conference. I just left a presentation given by the collateral policy managers at Fannie Mae and Freddie Mac.”

The Fannie spokesperson said that Fannie Mae has decided not to make the 1004MC a required from anymore; the change will be effective as of the new Selling Guide update, which is expected to come out next week.

I asked Freddie if they planned to drop the requirement as well? They said they had considered dropping it when the new reporting formats were finalized, but also said in light of Fannie’s announcement, they may not wait until the form-changes and adopt that decision sooner.

The Fannie spokesperson said that just because Fannie won’t requirement doesn’t mean a lender might not still want it. So, she warned not to expect all lenders to adopt the change instantly.

In my opinion, I think most lenders will opt out of the 1004mc form, but will require something else (data/analysis) in the report to support the market condition identification and adjustments (if warranted). So I don’t anticipate the need for market condition analyses to go away (and it shouldn’t, in my opinion) but I do anticipate more flexibility in the manner we (individual appraisers) want to present that data.”

What I think about 1004MC: The 1004MC forced appraisers to make market conditions adjustments, which lenders had to accept. When I started my appraisal business in 1986, I was told by local, well respected appraisers that lenders “did not want any time adjustments.” Apparently this had been going on for many years. During price declines in the 1990s, I personally knew appraisers who went out of business because they refused to not make time adjustments. All my lender clients allowed them or they were off my approved client list.

I started appraising in the 1970s at assessor’s offices. We were making 2% per month time adjustments. Guess I just got “bad training” for lender appraisals ;>

Appraiser comments: Of course, there were lots of appraiser comments. Dave Towne’s are below:
~1 Lenders and AMC’s (and the other gov’t agencies) won’t back down on requiring the 1004MC form in reports. So you will have to do it, regardless of what the GSE’s do.

~2 Some report users may design their own market conditions reporting form, and demand its inclusion in reports per their own assignment conditions.(One no-longer-in business-by that-name AMC did this in 2008, and demanded their form be included even after the MC form became mandated – until appraisers loudly complained.) These may not be acceptable to other lenders/users. So we could have a situation where multiple users have different forms required, which will greatly complicate completion of reports in a timely manner.

~3 The several report software providers may design something to replace the MC form, which you could then be used in reports. But if 4 (or more) different ones exist, the same situation as in #3 will occur.

~4 The GSE’s may have another form already prepared to replace the MC Form and will demand it be used instead. (By the way….”new appraisal report forms” to replace the current ones are nowhere ready to be released, at least from what the GSE’s have said in the past couple of months.)

~5 Smart, and well versed, appraisers will continue to provide supportable documents and analysis to show market trend activity – which they’ve already been including in reports as a substitute to the MC form. Appraisers who have not been doing this should take steps to learn how to document subject/comparable market trends that are specific to each assignment, and not just a regurgitation of ‘regional’ or ‘national’ trends data reported by others that may not directly apply to the appraisal assignment.

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7/19/18 Newz//Price declines? .History of Appraisals .Whale House

The History of Appraisals

By Ed Pinto
Excerpt: Many say “history always repeats itself” and in the case of appraisals, it may be for the best. We sat down with Edward Pinto, the Co-Director of AEI’s Center on Housing Markets and Finance as he shares with us his discoveries from the original FHA forms.

Dating back to the 1900’s Ed found the tools needed to bring the appraisal process back to how they were originally called for – based off of the market value and the information proved by the expert, the appraiser.

Very interesting and worth reading:

My comments: I have published several articles in my paid Appraisal Today about the history of appraising, going back to the Bible: the Book of Moses!! I have been inspired to republish them in the September issue of the paid Appraisal Today.

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7-12-18 Newz// 3 Story Homes, Auction Prices, Portable Architecture

The Most Popular Article From Last Week’s Newsletter: Former Appraiser’s Hot Dog Stand!! FYI, unusual and weird stuff is very popular with appraisers ;>

Three-story Single-family Homes and Townhomes

Excerpt: Of the 729,000 single-family detached homes started in 2017, a little over 18,000 (2.5 percent) had three or more stories, according to National Association of Home Builder tabulation of recently released Census data.

In contrast, the 23,000 3-plus story townhomes represent 22.0 percent of single-family townhome starts.

More info here:

My comment: 3 story detached homes are not popular in very many areas. It is a long walk up to the 3rd floor. I have appraised them (attic conversions of a classic older home to a master bedroom, for example). I always look to see if an elevator can be added – usually has to be on the exterior of the home. Definitely a functional problem. I rarely see them on existing homes, except for attic conversions. Some newer detached homes have a small room on the 3rd story – family room, extra bedroom, etc.

For townhomes, I have seen a significant increase in 3 story new construction townhomes in my city (within the past few years) and other Bay Area cities. The first floor is a garage plus entry, second floor living room and kitchen, bedrooms on 3rd floor. Very profitable for home builders, especially in areas with high land prices and infill tracts. I have appraised them and the owners did not object to the 3 floors. There are sometimes a few townhomes that are 2 story.

My first apartment when I moved to San Francisco in my 20s was a third floor walkup. I vowed Never Again ;>

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7-5-18 Newz//Busy or Not?, Prices Dropping, Appraiser Hot Dog Stand

Who’s busy and who’s not?

Varies widely around the country. Maybe it depends on housing affordability? See articles below. But, it is really hard to say what causes the geographic variation for appraisers.

Many areas have seasonal variations, but now we are in the traditionally strong summer months, so it is clearer that some areas have less appraiser work.

How do you tell if it is down? AMCs dropping fees. Fewer emails, phone calls, etc.  Other appraisers complaining.
What about steady to increasing biz? Decent fees, turning down work, etc.

Changes in turn times and fees when biz slows down

Appraisers just don’t seem to understand that AMCs work for lenders and try to do what they want.

Why do AMCs/lenders want faster turn times?
AMCs work for lenders. They are competing on turn times primarily, like they always have. Business is very competitive and is declining.

Value pressure?
Is there more value pressure from some of your AMC clients?
Some lenders want to close as many loans as possible and keep profits from dropping.

Why do AMCs drop fees?
Direct lenders have their own fee panels don’t send out bid request to lots and lots of appraisers. Their fees don’t change dramatically. They have never focused on changing appraisal fees frequently. AMCs need lower appraisal fees to keep their profits up, just like you do. I have always thought of AMCs as very large appraisal companies that mostly fee out all their appraisals.

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6-21-18 Newz// $760,000 Parking Space, Peak Prices?, Hypervacancy

A $760,000 Parking Space ($5,000 per sq.ft.)

By Jonathan Miller
Excerpt: In 2007, I analyzed Manhattan parking spaces that made page one of the NY Times (oh, and my wife broke her leg that day). The takeaway was that parking spaces sold for about the same price per square foot as a typical apartment in the same building. Typical parking spaces run about 150 square feet in size.

This US $760,000 Hong Kong parking space sale (a flip) was a little more than $5,000 per square foot in a luxury project. The average residential sale is US$3,182 per square foot. Based on what we see for Hong Kong housing prices, that price really doesn’t sound so crazy.

In the greater reality, it sounds absolutely nuts. Without the context of an HK$100M condo nearby…

Scroll down to Appraiserville for a long story about a VA appraisal “gone bad” plus lots more good stuff at:

http://www.millersamuel.com/note/june-15-2018

Surf’s Up! America’s Most Affordable Beach Towns, 2018 Edition

Excerpts: These aren’t the country’s best known and rarified ocean towns (sorry, Hamptons and Malibu!), but each one has a great beach and a cool and distinct vibe, from ruminative to rowdy, serene to (sorta) swanky.

Here are a few:
1. Gulfport, MS
Median home list price: $184,100
2. Jacksonville, NC
Median home list price: $184,600
9. Coos Bay, OR
Median home list price: $274,200
Lots more detail at:

https://www.realtor.com/news/trends/americas-most-affordable-beach-towns-2018-edition

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5/31/18 Newz//Crash in 2020?, Floating Homes, Rate changes since 1900s

Floating Homes the Ultimate Water View

Excerpts: For many, floating is something new and adventurous,” said Max Funk, co-editor of “Rock the Boat: Boats, Cabins and Homes on the Water” (Gestalten, 2017). The book reveals an explosion of creativity in buoyant architecture, including an egg-shaped floating cabin in England, floating spas (with working saunas) in Finland and the United States, and floating geodesic domes in Slovenia.

Outside of Seattle, where houseboat construction is being curtailed because of the potential impact on local salmon populations, Ms. Bethell said, the most prominent areas in North America for floating homes are the San Francisco Bay Area; Vancouver, British Columbia; Key West, Fla.; and Portland, Ore.; where the number of floating homes has doubled since 2012.

My comment: In the San Francisco Bay Area they are in several marinas, including in my city, Alameda. In the past, they were anchored around the bay, but were moved to marinas due to pollution concerns. When I moved here in 1968, I visited one anchored off Sausalito in a protected bay with no sewage storage.

2018’s Hottest Backyard Amenity: Detached Living Spaces

Excerpt: The reason for their rise in popularity? Privacy, for one. There’s no one-and no surrounding noises from your disruptive family or neighbors-to make you lose your focus. It’s all you, the shed and whatever your No. 1 priority is for the day. Not to mention, if you have a lush and peaceful backyard, the view is a plus.

So, what do these look like? Anything you can imagine. From hobbit hole-style sheds to more contemporary glass structures, these can take the form that best suits your needs. And what are they used for? That depends on you…

http://blog.rismedia.com/2018/detached-living-spaces

My comment: a great way to get some peace and quiet plus privacy ;>

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4-26-18 Newz//Tristar Waivers Denied, Fannie Update, FHFA Paper on Value of AMCs Questioned

Technology or Human Logical Analysis? Who Wins?

By George Dell, MAI, SRA, ASA, CDEI
Excerpt: There is evidence that human judgment WINS – the appraiser opinion beats the AVM and other valuations based on technology. In fact, I have often heard that the qualified appraisal, based on the human logical analysis – is the “gold standard” for the industry. This appears to be true of client groups, and appears to be recognized in administrative law, our federal and state and “quasi-governmental” bodies such as Fannie Mae, Freddie Mac, and the Appraisal Foundation.

Even as we say this, the human model, the appraiser, continues to lose market share to other technologies and other “non-appraiser” value providers.

Worth reading at:

My comment: George Dell’s weekly blog posts are great, but short, as is appropriate for blogs. The May issue of the paid Appraisal Today newsletter will have a much longer article by George, “Will another profession replace appraisers?”

Uredd Rest Area (Ureddplassen)

Norway has built what may be the world’s most beautiful public toilet.

Just For Fun!!

Excerpt: Norway’s newest landmark is a place of absurd beauty. The redesigned rest area, situated along a section of the Norwegian Scenic Route, overlooks stunning views of the fjords and the open sea, and is a popular spot for visitors and locals to watch the northern lights in winter and the midnight sun in summer.

Now this picturesque place is quickly gaining a stranger kind of fame, for being home to what may be the most beautiful public toilet the world over.

Check out the Fantastic Photos and short description at:

My comment: Wow!! What do I use in the field? Fast food, bushes, etc. ;> Sometimes a crummy restroom or smelly portable toilet in a public park… Please hit reply of you know any other great public restrooms…

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4-19-18 Newz//Corelogic acquires a la mode, USPAP Q&A problems, Earth-Friendly Homes

Earth-Friendly Homes and Buildings for Earth Day, Sunday, April 22

Just For Fun!!

Click on the fotos of lots of ecofriendly buildings for more info. Fascinating, sometimes Weird, and Fun!!

A few: Mathematical Puzzle House, paper house, skyscrapers, Recycled Concrete Tube House, etc.

http://www.ecofriendlyhouses.net/ecofriendlyhouses.html

Appraisal Institute Requests Appraisal Standards Board to Rework Q&As

Excerpts: The Appraisal Institute in an April 13 letter to the Appraisal Standards Board formally requested changes to or the retraction of Q&A 2018-12, Employing an Extraordinary Assumption when a Client Provides Inspection Data and Q&A 2018-13, Appraisal Reporting – Certifications and Signatures.

The Appraisal Institute believes this advice is antiquated and out-of-step with appraisal practice and long-standing USPAP principles about not dictating the form, format or style of an appraisal report. Perhaps most concerning to AI is the apparent inclusion of additional requirements in this advice rather than in USPAP itself.

My comment: I completely agree with the AI’s issues with Q&A 2018-12 and -13. The certification issue has been around since USPAP required that the “previous 3 years” be included in the certification. The ASB needs to modify USPAP itself as I don’t think it addresses these current issues in appraising very well. Unfortunately, the new edition was effective 1/1/18. 2 years to wait.

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