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Appraiser News: HVCC Anniversary, Appraisers Holding On

May 10th, 2010 by Bill Collins Leave a reply »

TUESDAY, MAY 11TH, 2010

Fannie Mae & Freddie Mac Report Large First Quarter Losses

We know all about the Wall Street Journal’s concern for what they call the “toxic twins.” Most recently in their editorial on May 6th, they stated “from the 2008 meltdown through 2020, the toxic twins will cost taxpayers close to $380 billion, according to the Congressional Budget Office’s cautious estimate.” On May 7th, in a New York Times article titled “Ignoring the Elephant in the Bailout,” Gretchen Morgenson notes that Freddie Mac’s first quarter report, which reported a $6.7 billion loss, “…caused nary a ripple in the placid Washington scene…”  She notes Freddie’s statement that its credit losses would likely continue throughout the year with the substantial number of underwater borrowers contributing largely to the loss.  Ms. Morgenson quotes Dean Baker, co- director of the Center for Economic and Policy Research in Washington, as stating: “I don’t understand why people are not talking about it…” The article points out the conflicting roles by Fannie and Freddie which are charged with supporting the mortgage market by purchasing loans from banks while at the same time working to minimize credit losses.  A link to the New York Times Article is found here:

Fair Game – Ignoring the Elephant in the Bailout

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Stories of Foreclosure From Around the Country

Nevada & California, courtesy of the Huffington Post on May 3rd:

Harry and the Homeowners

Southern California, courtesy of CNNMoney.com on May 5th:

Drowning in Home Debt

Florida, amongst the more well-off, from CNNMoney.com on May 4th:

Foreclosure is Hitting Well-Off Families, Too

And here is one of the bearers of bad tidings in Illinois, from the New York Times May 7th:

As Homeowners’ Dreams Die, He’s the Undertaker

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Broker Price Opinions (BPOs) and Broker Opinions of Value (BOVs): The New Toxic Twins

We want to thank the many appraisers who have taken actions in one way or another to help publicize the dangers of BPOs and BOVs.  Once again, we at Appraiser Help want to note our support for the positions taken by the four appraisal organizations which authored the March 8th and April 20th letters opposing the use of both BPOs and BOVs.

Please visit our website www.EndBPOsNow.com for additional information and for contact information if you would like to join the effort to End BPOs Now!

The entire April 20th letter from the four appraisal organizations regarding their concerns can be viewed by clicking on the following link:

Letter to State Appraiser Board Chairs

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Mixed Messages Regarding Commercial Real Estate and Multi-Family Housing

Various commercial lenders and other analysts have been issuing their first quarter reports with the overall message essentially being downbeat but maybe less so than several months earlier.  On April 28th, an article by Mark Heschmeyer of CoStar Group titled “1Q Bank Results: Potential for CRE Armageddon Fading” included a number of comments from various market participants and a link to this article is here: 1Q Bank Results: Potential for Commercial Real Estate Armageddon Fading

Readers interested in learning more about CoStar can visit their site at www.CoStar.com

Moodys Investors Services at the same time reported that an improving economy was boosting apartment demand resulting in higher rents, greater occupancy rates and an improved outlook for owners of multi-family housing.

The New National Pastime; Grieving Property Tax Assessments

The New York Times on May 7th, in an article titled “Seeking Lower Property Taxes on a House of Sinking Value” discussed how grieving property taxes “…is becoming a national sport.” It provides illustrations from different areas, such as Lakewood, NJ, Westchester, NY and Cobb County, Georgia. In the latter instance, Phillip Hogsed, Cobb County’s director and chief appraiser in the assessor’s office, reportedly indicated that 16,200 homeowners filed notices that they wanted a review of their property taxes between January 1st and April 1st, up from last year’s figure of about 12,000 and the previous year’s averages of approximately 5,000. The article indicated that this was out of a total number of 250,000 real estate parcels in Cobb County.

The article quotes the owner of a property tax reduction company who works on a contingent basis as sayin that “I do my own appraisals. Some others might charge you for an appraisal, and that can run you hundreds of dollars.” It also quotes Peter Sepp, Executive Vice President of the National Taxpayers Union (NTU), as saying that the process of grieving taxes is so simple that homeowners shouldn’t pay anyone to do it.

Some thoughts:

Like the flat earth theorists and flat tax proponents (an idea espoused by the NTU), it is nonsensical to suggest that homeowners shouldn’t consider using professionals to review and assist them in the process of grieving tax assessments, a process which differs tremendously from one municipality to the next.

Licensed and certified appraisers are logically the professionals who should be involved in providing the most accurate, unbiased market value estimates to homeowners concerned about property tax assessments that are overblown.

In many areas, property owners and departments of assessment recognize the contribution provided by appraisals provided by licensed and certified appraisers. Why, however, is the number of grievances still such a tiny percentage of the overall number of over-assessed properties, and why aren’t appraisals by licensed and certified appraisers used more frequently?

Final question: Why aren’t appraisers doing more to promote the importance of their services in property tax assessment matters? By the way, this is generally full-fee work with turn times measured more in weeks than in days or hours.

A link to the New York Times article is found here: Seeking Lower Property Taxes on a House of Sinking Value

Rates & Dates

The Mortgage Bankers Association (MBA) in its most recent Weekly Mortgage Applications Survey for the week ending April 30th reported that the average rate for 30-year fixed-rate mortgages rose to 5.08% from the previous week’s rate of 5.02%. Freddie Mac reported a decline to 5.0% in their most recent report for the week ending May 6th, down from the 5.06% during the previous week.

Freddie Mac’s Chief Economist, Frank Nothaft, in his weekly commentary from May 6th noted that:
“Rates for both the 30-year and 15-year fixed-rate mortgages were the lowest in six weeks; initial rates on 5/1 hybrid ARMs hit an all-time low since they were added to the survey in the beginning of 2005.

The homebuyer tax credit helped support home sales in March, and anecdotal reports point to strong April sales as well. Pending existing home sales rose for the second consecutive month in March to the strongest pace since October 2009, just before the original deadline for the credit, based on figures published by the National Association of Realtors. Three of the four Census regions showed an uptick in sales, led by the South with a 12.7 percent gain, while sales in the Northeast fell 3.3 percent. To receive the federal tax credit, homebuyers had to sign contracts by April 30th…”

In an interview on CNBC on April 30th, Robert Shiller of Case-Shiller and Richard Smith of Realogy discussed the question of whether the housing rebound will continue showing signs of recovery.  Essentially they had serious questions whether a recovery would continue, with the exception of the high end market which Mr. Smith said was strongly rebounding.  This discussion between Mr. Shiller and Mr. Smith on CNBC can be viewed by clicking on the following link: Honing In On Housing

Additional information from the Mortgage Bankers Association can be found by going to their site at: Mortgage Bankers Association Research and Forecasts

Additional information from Freddie Mac can be found by going to: Freddie Mac Primary Mortgage Market Survey PMMS

Where Has All The Money Gone?

Also on April 30th, in an article in the New York Times, Uwe E. Reinhardt noted that on the previous Sunday’s Meet the Press, Senator Christopher Dodd stated that “We’ve lost almost $11trillion of household wealth in the last 17 or 18 months”.  Mr. Reinhardt raised the obvious question of “Where did all this wealth go?”

He illustrates the assumptions made as to discount rates related to future cash flows in commercial real estate to show how sensitive value estimates are to even small changes in these assumptions and states:
“It is here that mood enters the picture.

If investors are exuberantly optimistic about the future growth of the economy and future rental rates, and if they believe there is little risk in such long-term investments, the risk premiums they demand tend to be low and real estate values correspondingly high. Completely irrational exuberance of the sort we have seen in recent years can easily lead to serious “underpricing of risk” and, thus, to real estate bubbles.

On the other hand, if investors are very pessimistic and worried about the risk inherent in such investments, their risk premiums rise and asset values fall. Irrational despondency can lead to overpricing risk and underpricing real estate.

Now, what is true for real estate also applies to other assets — home values, stock prices, bond prices and so on.

So let’s go back to the lost $11 trillion in wealth lamented by Senator Dodd. Where did it go? For the most part, I suspect, it just went up in smoke. It represents a loss of wealth that once exuberant folks imagined to have had and now imagine they no longer have.”

A link to this article is found here: Where All That Money Went

What Will $450,000 Buy in Boulder, Colorado, Tuscon, Arizona and Marlborough, Connecticut?

Fun slide show from the May 7th New York Times shows what is available in some of my favorite places: Properties for $450,000 – Slide Show – NYTimes.com

Ask Angie

We want to acknowledge the consistently poor performance of Mr. Gerard D. Snover in Angie’s contest. An example of this is his answer to Angie’s question on March 16th “Who said ‘You never know what is enough unless you know what is more than enough.’”
In this contest Mr. Snover, a Certified General Real Estate Appraiser from Babylon, New York, answered “Pamela Anderson.” Mr. Snover, one of the most intelligent and articulate appraisers in the United States who has practiced (it is rumored) for more than half a century, appears to be auditioning for his next career as a comedian (or maybe he could help assist in a rewrite of Fannie Mae Form 1004MC).

Today’s questions:

Question 1) Who said: “If I had asked people what they wanted, they would have said faster horses”

1. Secretariat

2. John P. Chrysler

3. Henry Ford

4. Jonathan Schwin

5. None of the above

Question 2) Who said:
“Without music, life would be a mistake”

1. Leonard Bernstein

2. Nietzsche

3. Jim Morrison

4. Johann Sebastian Bach

5. None of the above

The first person to respond with all three correct answers wins a choice of either:

One Free Trade Show Pass or $199 off a Full Conference Pass to Valuation 2010 or

A Highlighted Listing for one year on www.AppraiserHelp.com and either www.FHAAppraisers.com or www.TaxGrievanceAppraisers.com (including other Appraiser Help membership benefits, up to a $225 value)

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:

Suzanne Fahien

Pat Reass

Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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