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Archive for August, 2011

Earthquakes, Hurricanes, and…

August 30th, 2011

Widespread Response to Wall Street Journal Article "Judgment Call: Appraisals Weigh Down Housing Sales"

In our last newsletter, we discussed the page one article in the Wall Street Journal by S. Mitra Kalita and Carrick Mollenkamp which cited numerous individuals as protesting that low appraisals were driving down the real estate market.  The article highlighted the assertion that “Lenders are pressuring appraisers to come in with lower estimates, some real estate professionals say.”

The National Association of Realtors (NAR) has apparently chosen to make this a “talking point”, distracting attention from positive actions that could be taken (some even proposed by the NAR) to stem the decline in the real estate market and help resuscitate the economy.  In our last newsletter, we noted the comments of the NAR’s chief economist, Lawrence Yun, regarding contract cancellations in which he “…blamed the unusually large number on low appraisals.” Yesterday, Mr. Yun stayed on message in his comment released with the pending home sales report for July, which was down from June:
“We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations…”

On August 26th, Jed Smith, Managing Director, Quantitative Research of the NAR released a report titled “Appraisals Still a Problem”.  Links to this and yesterday’s NAR press release are found here:
Appraisals Still a Problem: Economists’ Outlook

Pending Home Sales Slip in July but Up Strongly From One Year Ago – NAR

On August 26th, the Letters to the Editor of the Journal contained a number of responses from appraisers and John S. Brenan, Director of Appraisal Issues for the Appraisal Foundation, which sought to correct the misconceptions in the Journal article and perpetuated by the NAR.  A link to this is found here: Appraising Appraisers Appraising Real Estate Values

Readers of AppraiserNews.com also had a few things to say about this, including this email we received from an Alabama appraiser:
“Bill, I read your article in today’s AppraiserNews.com. It was with interest that I read another quote by Lawrence Yun, Chief Economist of the NAR. If I remember correctly, it was Mr. Yun who was crowing to high heaven that there was no housing bubble back when the bubble was its largest. Mr. Yun went dark for quite a while after the bubble burst. I hoped that the NAR had recognized the he exposed himself for the paid shill he is but, apparently, the NAR is as shameless as he is since they are still his employer.  It should also be noted that the immediate past president of the Appraisal Institute is Leslie Sellers, not Larry Sellers. Thank you.”

We would like to thank this reader for his thoughts and for correcting our error in the last newsletter.  In regard to correcting errors, didn’t Mr. Yun promise earlier this year that the NAR would be investigating the gross errors which they made in over-stating sales figures over a period of several years?  At the time, Mr. Yun said that this was an important issue which they would be carefully looking at.  It seems as though this effort to correct their serious errors has become secondary to “shooting the messengers”, the appraisers who are just giving their honest, unbiased opinions of value. 

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Suggestions to Help the Real Estate Market and Economy Recover are Beginning to Emerge From Americans Across the Political Spectrum

We would like to see more actions by the NAR such as that delineated in their August 23rd press release in which they called for the White House to host a housing summit “To help develop policies that will stabilize the nation’s housing market and support an economic recovery…”  NAR President Ron Phipps is quoted in this release as saying that: “Housing and home ownership issues affect all Americans, which is why we need strong policies that will help stabilize the housing market and lead the way out of today’s economic struggles.”  A link to this press release is found here: Realtors Call on White House to Host Housing Summit

On August 24th, Shaila Dewan and Louise Story writing in the New York Times discussed a plan under consideration by the Obama administration to stimulate the economy by allowing millions of Americans to refinance their mortgages at today’s lower rates.  The article did not provide much information as to how this would be accomplished, saying that the matter was still under discussion.  A link to the Times’ report is found here: U.S. May Back Refinance Plan for Mortgage

Senator John McCain, in a Meet the Press interview with David Gregory earlier this month, offered similar thoughts regarding solutions to the problems facing the housing market and economy:
“But remember, it was the housing market that triggered this crisis. We put liquidity into the financial institutions and obviously they’re doing fine. They’re sitting on a trillion and a half of cash that they’re not spending. But the reality is that the housing market is what triggered this crisis, and it’s going to be the housing market that recovers. And that means to me, go out and buy up people’s mortgages as we did during the Great Depression, and give them a mortgage that they can afford the payments to make, and then we will begin to come out of this problem.”

Another solution in this vein was offered by Glenn Hubbard, the Dean of the School of Business at Columbia University, who suggested how mortgage refinancing could help to jumpstart the economy (similar to a $70B tax break) in a video interview yesterday with Marketwatch’s Greg Robb.  Here is a link to that video: Mortgage and Real Estate Video News

A new initiative was also recently offered by an organization known as The New Bottom Line.  This program, which they called “The Win/Win Solution (How Fixing the Housing Crisis Will Create One Million Jobs)” makes the following points:

“The overhang of underwater mortgage debt is one of the primary drags on economic recovery. It continues to devour tens of billions of dollars annually, money that would otherwise go into our economy in the form of consumer spending…increase in consumer demand would in turn help spur job creation and increase revenue for governments that have seen their tax income plummet as a result of the downturn.

To date, foreclosure prevention efforts have focused on making the banks whole for a period of time while doing little to fundamentally restructure and reduce the debt load carried by homeowners.  The underlying assumption in this model – that if we wait it out, then things will get better – is not only flawed, but is actually worsening the pain for millions of families and continuing to undermine long-term prospects for a housing recovery. We need aggressive action now that creates a New Bottom Line for American homeowners.

The banks have it in their power to restore the American Dream of homeownership that helps build wealth for families. What’s more is that we have already paid them the money to do it. American taxpayers came to the banks rescue with trillions in bailouts and backstops and now it is time for the banks to begin to undo the damage they caused and give back a working economy.”
A link to this report in its entirety is found here:
The Win/Win Solutions, How Fixing The Housing Crisis Will Create One Million Jobs

Gretchen Morgenson (author of Reckless Endangerment) had some thoughts on this matter on Sunday and a link to her article in the New York Times is found here: The Rescue That Missed Main Street

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Links to Recent Real Estate Reports and Analyses

On August 23rd, Bloomberg interviewed Nicolas Retsinas, director emeritus of the Joint Center for Housing Studies at Harvard University, and a link to this video is found here: U.S. Housing Market Outlook, Foreclosures – Video – Bloomberg

On August 24th, Bloomberg’s Kathleen Howley discussed the Federal Housing Finance Agency’s home price report for the second quarter, which showed a year to year decline of 5.9% and a link to this article is found here: Home Prices in U.S. Decline 5.9% in Second Quarter, FHFA Says

On that same day, a CNBC video with Diana Olick discussed the Mortgage Bankers Association distressing report that purchase mortgage applications fell to a 15 year low and a link to that video is found here: Mortgage Purchase Applications Fall

The following day, Ms. Olick discussed the Realty Trac report which showed that approximately 1/3 of the sales during the second quarter were of distressed properties and the withering of demand otherwise as households were getting bigger due to the spurring of multi-generational living caused by the tight mortgage market.  A link to this article is found here: The Housing Market is Shrinking

On August 24th, CoStar’s Mark Heschmeyer discussed how the commercial real estate markets “extend and pretend” was ending with the result being both true mortgage modifications along with more inventory being forced into the marketplace and a link to this report is found here: As Era of "Extend and Pretend" Ends, More CRE Shopping Begins

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On the Lighter Side..

On August 26th, CNBC put out a slideshow titled “10 Major Architectural Failures” and a link to this interesting piece (including a hotel with a “death ray”) is found here: 10 Major Architectural Failures

While we are on the subject of architects, on that same day CNNMoney put out a video of a young architect’s 78 square foot apartment (which represented a downsizing from his previous 96 square foot living space) and a link to this is found here: Home Sweet 78-Square Foot Home

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UAD Takes Effect September 1st with Fannie Mae and Freddie Mac, FHA Extends Implementation to January 1st

Time is getting short for residential appraisers to prepare for the UAD!  Make sure that you have decided on which software provider you will be utilizing and “test drive” the program before you are on deadline to send a compliant report out.  Remember also to check out McKissock’s online class by clicking on the following link: Appraiser Continuing Education

At the same time, both residential and commercial appraisers should set aside some time on a weekly basis to build their private, non-mortgage appraisal practice and evaluate whether you are doing all that you can reasonably afford to in marketing your services to attorneys, accountants, property owners, etc. Don’t forget about the users of the “two billion connected devises” on the internet that we discussed in the last newsletter!

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Hurricanes, Turn-Time and Customary and Reasonable Fees: A Personal Anecdote

On Friday afternoon, my Long Island based appraisal company received a request for an appraisal on Fire Island, a barrier beach situated off the mainland of Long Island and accessible by ferry only. Simultaneously with this request, an evacuation of Fire Island had just commenced with ferries bringing people back to the mainland and forbidden to bring people back to Fire Island. The fee offered by this AMC, which I had previously found to be pleasant to deal with except for somewhat unsatisfactory fees, was $150 for a 2055 exterior (not a drive by, cars not allowed on the Island). The appraisal was to be completed and submitted back to the AMC by Monday.

I phoned the AMC and explained the situation, cutting them some slack as they are located on the west coast and might not be familiar with Fire Island. I explained to their rep that my office was located within walking distance to one of the ferry terminals to Fire Island and that I had 20 years of experience appraising properties there. I also told them that the subject property was located in one of the higher priced areas of Fire Island, with many larger and waterfront properties. I told them that it would be Monday or Tuesday before the ferry company knew when passengers might be allowed back on Fire Island, depending on the destruction that might be caused by the hurricane. I explained to them that the customary and reasonable fee for appraisals there, under normal circumstances, was several times what they were offering.

On Saturday afternoon, as the hurricane approached, I received a revised appraisal request: the fee was revised to $210 and the appraisal was to be due on Wednesday August 30th.

Needless to say, I had interesting conversations with this AMC Saturday and yesterday…

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One Final Clip

Courtesy of The Daily Bail, here is a link to Steve Jobs moving commencement address at Stanford University in 2005: Steve Jobs Talks About Life And Death – Stanford Speech – The Daily Bail

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Rates & Dates

Freddie Mac and the Mortgage Bankers Association (MBA) both reported increases in mortgage interest rates in their most recent weekly reports.

Freddie Mac reported that rates for 30-year fixed-rate mortgages rose to 4.22% for the week ending August 25th in comparison with the 4.15% rate reported during the prior week.   

The MBA in its most recent Weekly Mortgage Applications Survey for the week ending August 19th reported an increase in its average to 4.39% from the previous week’s rate of 4.32%.   

In their press release of August 24th, the MBA reported a 2.4% decrease in mortgage applications during this most recent week with refinance activity increasing to 79.8% of applications.  Mike Fratantoni, the MBA’s VP of Research and Economics stated in the report that:

“Another week of volatile markets and rampant uncertainty regarding the economy kept prospective homebuyers on the sidelines, with purchase applications falling to a 15-year low. This decline impacted borrowers across the board, with purchase applications for jumbo loans falling by more than 15 percent, and purchase applications for the government housing programs (FHA, VA, and USDA) falling by 8.2 percent. Although mortgage rates remain quite low, they increased over the week, bringing refinance application volumes down slightly.”

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

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

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Ask Angie

We would like to congratulate our two most recent winners, Jamie West, a Certified General Appraiser with Palm Beach Appraisers and Consulants in West Palm Beach, Florida, and Donnell Moore, a Certified Residential Appraiser with Moore Appraisal and Consulting in Nashville, Tennessee.

Here are the answers to the questions from the last newsletter: William Butler Yates was the author of the quote “Things fall apart; the center cannot hold; Mere anarchy is loosed upon the world,” George Bernard Shaw said “Better never than late” and Leonard Cohen noted that “The poor stay poor. The rich get rich. That’s how it goes. Everybody knows."

Today’s questions:

1. Who Said: "Be content with what you have; rejoice in the way things are. When you realize there is nothing lacking, the whole world belongs to you."

a) Lao Tzu
b) Confucious
c) Jesus Christ
d) Maharishi Mahesh Yogi
e) None of the above

2. Who said: “We’re gambling on our vision, and we would rather do that than make ‘me too’ products. Let some other companies do that. For us, it’s always the next dream."

a) Jeff Bradford
b) Steve Jobs
c) Tom Armstrong
d) Dave Biggers
e) None of the above

3. Who said: “I want to put a ding in the universe."

a) Elon Musk
b) Mark Zuckerberg
c) Steve Jobs
d) Stephen Hawking
e) None of the above

The first person to respond with the correct answers wins a choice of one of the following:

One Free Regular Listing on AppraiserHelp.com

A Free Copy of the 12/10 UPDATED Directory of Appraisal Management Companies (Available Now to Members of AppraiserHelp.com and FHAAppraisers.com FREE!)

One Free Trade Show Pass to Valuation Expo 2011 in Las Vegas

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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!

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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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